The credit repair industry has become a crowded place. The credit crisis has led to increased lending restrictions that resulted in making a good credit rating much more important than it had been in years. Finding themselves no longer being considered good candidates for loans because their credit score isn’t as good as it now needs to be, thousands are turning to credit repair services for help. Hoping to capitalize on the trend, new credit repair providers are popping up all the time claiming to be experts at repairing bad credit.
With so many new and inexperienced credit repair providers entering the market, many of which are simply turnkey credit repair businesses using third party software as the backbone of their product, it becomes a challenge to know who you can trust with your credit. To help separate the quality credit repair companies from the amateurs trying to make a quick buck, here are three tips for spotting a reputable credit repair service:
1) Check for experience – Setting up a credit repair company is surprisingly simple. All a person needs is a web site and a little money in the bank to pay for a credit repair software package. Staying in the business and generating good results is more difficult. The leading credit repair services typically have an established history of helping people which is not only indicative of a stable business, but it is also a sign that the company operates within the confines of the law since most shady companies have a short lifespan.
A credit repair company’s BBB report will show how long the company has been in business, although not necessarily how long they have been providing credit repair services. If the companydoesn’t have a BBB report, it may be a red flag since the company may be very new. When you are unable to determine how long a company has been operating, you can try performing a WHOIS lookup of their website’s domain name to see how long it has been since the domain was registered, but if it requires that much work to track down the information, you’re probably better off looking elsewhere.
2) Look for a “brick and mortar” presence – The Internet is a great vehicle for commerce, but the process of repairing your credit is more effective when performed offline. Trustworthy credit repair companies usually have a physical location that you can use as an indication of how solid the company is. Satellite imagery services like Mapquest are great tools for checking out the company’s headquarters. Get the company’s address, load a map and see if the company has their own building, is headquartered in an office complex, rents out a space in a strip mall, or has the mailing address of a personal residence.
3) Look at pricing and payment options – Drafted in the mid nineties, the Credit Repair Organizations Act CROA sets guidelines credit repair companies must abide by. One of these is to only accept payment for services after the agreed upon services have been performed. This was put in place to protect people from fraudulent companies who would charge large upfront fees and never provide the expected credit repair services.
As a result of this, you should steer clear of credit repair providers who require an upfront payment.
In addition to finding out when and how much you will be expected to pay, make note of the payment options. Most reputable companies will, at a minimum, give you the option to pay via credit card on their website or over the phone. Additional payment methods may also be accepted.
Be wary of companies who require checks or money orders as you do not have the same level of protection in case you need to recover your money if something goes wrong. Also watch out for companies who employ third party payment processing on their website such as Paypal since this can be indicative of a fly by night service. Finally when providing payment information online, make sure the webpage is secured. Before entering your credit card on a webpage, make sure the address of the page starts with “https” and your browser (Internet Explorer, Firefox, Safari, etc.) displays a padlock or similar icon indicating the connection is secure.
The Federal Trade Commission (FTC) is charged with the enforcement of consumer protection law and has the responsibility of shielding consumers against unscrupulous companies that unfairly garner our business through false claims, exaggerations, illegal services, and improper disclosure. With regards to dishonest credit repair services, practices like these became so common that Congress passed a federal law to outline how credit repair organizations can operate. The Credit Repair Organization Act (CROA) was passed to protect consumers and provide them with recourse if they are victimized by a dishonest credit repair organization.
When researching credit repair companies, there are some glaring red flags that should alert you to stay clear. According to the FTC, avoid services that:
Require Payment in Advance – Credit repair providers should not request payment they have worked on your case. Under the Credit Repair Organizations Act, these companies cannot require payment until they have completed the services promised.
Do Not Disclose Your Rights – Legitimate credit repair companies will inform you that you can order one free copy of your credit reports each year from each of the credit bureaus, and that you are able to dispute questionable items on your own, free of charge. If you are not alerted to this information, specifically in the form of a CROA required written disclosure titled “Consumer Credit File Rights Under State and Federal Law”, you should probably look elsewhere.
Endorse Using a New Credit Identity – Some shady credit repair clinics will go so far as to advise you to create a new credit identity by creating and using an Employer Identification Number (EIN) in place of your Social Security number. This “file segregation” tactic is a serious crime and if any credit repair company suggests this as an option, run the other way.
Misrepresent the Services They Provide – Be wary of credit repair services that promise to remove negative and accurate items, such as liens and foreclosures, from your credit file. No one can guarantee that items will be removed, especially if the items are true.
Fortunately for today’s consumer, half a century ago Congress realized the system of credit reporting needed legislation. The practices of the credit bureaus and the agencies using the credit reports they provided were shocking. American consumers were being taken advantage of by a system they had no way of influencing and no way of keeping in check.
To counter these abuses, Congress enacted the Fair Credit Reporting Act (FCRA) which with its subsequent revisions has become the cornerstone of your consumer credit rights. It is because of the Fair Credit Reporting Act that you have the right to see what is being reported on your credit files and to work to correct any inaccurate negative items they contain.
In addition to the Fair Credit Reporting Act, there are other consumer protection acts that give consumers certain rights when you are working with creditors or collections companies who provide information to the credit reporting agencies. By being aware of and taking advantage of their rights under each of these statutes, consumers have been able to successfully fix their credit score.
Fair Credit Reporting Act
The Fair Credit Reporting Act is what got credit repair started. Because of this act, you have the right to order copies of your credit reports and to dispute questionable credit directly with the credit reporting agencies.
Fair Debt Collection Practices Act
Along with protecting your against abusive behavior from debt collectors such as calling you at unusual hours, screaming at you, cursing, lying about who they are, or threatening physical violence in an effort to collect a debt, the Fair Debt Collections Practices Act (FDCPA) gives you powerful debt validation tools that give you the right to challenge any debt.
Fair Credit Billing Act
Similar to how the Fair Debt Collection Practices Act governs collections agencies, the Fair Credit Billing Act affords you the right to dispute questionable negative credit listings directly with your original creditors in order to modify how they are reporting your accounts to the credit reporting agencies.
Credit Repair Organizations Act
With all the regulations surrounding credit correction, it can be overwhelming for a newcomer trying to repair their credit rating. Fortunately, there are reputable credit repair companies who help consumers work towards a fair and accurate credit score. These credit repair organizations are regulated by the Credit Repair Organizations Act which helps prevent consumers from becoming a victim of a credit repair scam.
The credit repair industry can be a scary place. Given the abundance of news articles, TV stories, and “expert” pieces warning of credit repair scams that get pushed out by well regarded media outlets, it can look like the only logical choice is to avoid credit repair companies entirely – a course of action many news outlets seem to advocate.
A quick search turns up numerous articles detailing how to avoid a credit repair scammer. Most talk about red flags such as companies charging large upfront fees, advocate creating a new credit history, don’t advise you of your rights, and otherwise make misleading or untruthful claims. At this point, however, very few articles concede that there are credit repair services who do not engage in the illegal or fraudulent practices that typify a credit repair scam. In fact, some articles from premier news agencies like CNN conclude by advising people to “get legitimate help” from consumer credit counseling services.
Not only is this advice incomplete as it implies that there are no legitimate credit repair services, but it is also 100 percent useless to people who truly could benefit from the assistance of a legal credit repair service. Credit counseling programs may be able to help people who are struggling to pay off their debts, but it will do nothing to repair your credit reports. Some credit counseling programs may even make your credit score worse.
Unlike credit counseling services that work to help bring your debts under control, credit repair services are designed to help you increase your credit score. They are not mutually exclusive offerings and in many cases, a person who has used a credit counseling service to help manage their debts becomes a great candidate for credit repair.
Legal credit repair services like those provided by Lexington Law have a purpose and it is a disservice to imply otherwise. Hopefully as consumers and news columnists alike become more familiar with the services credit repair organizations provide, we’ll start seeing a better balance between news stories warning of credit repair scams and news stories detailing qualities to look for in a good credit repair company.
Selecting a credit repair company is a big decision. Choosing the wrong company could end up costing you hundreds or even thousands of dollars. And on top of that, if they are unsuccessful in repairing your credit, you have delayed achieving your goal of an improved credit score by months or even years. And if that wasn’t enough, getting caught up in a fraudulent credit repair service could get you in legal trouble.
So to assist you through this process and help keep you safe from getting taken advantage of by a credit repair scam, here is a guide to shopping for a credit repair service. Below are some tips you can use to ensure you end up choosing a trustworthy credit repair company to help you work towards achieving your credit goals.
Know how the credit system and credit repair work
Before you begin looking for a credit repair company, you should know the basics of how the credit reporting system works. You wouldn’t go shopping for a new car if you didn’t know anything about how to drive or how cars operate. So make sure before you begin looking for a credit repair company you have some understanding of how the credit reporting agencies function, how your credit reports are created, how they are used, and why it is up to you to follow up on their accuracy. Also, familiarize yourself with what you can do to repair your credit yourself. You may find that you don’t need help from a credit repair expert.
Understand what a credit correction company can and cannot do
Regardless of what some credit repair clinics would have you think, there are no hidden tricks to cleaning your credit. Credit repair organizations use the same methods to fix your credit reports that are available to you as an individual. The only difference is that an experienced credit correction company already has the knowledge and experience necessary to make use of these credit repair resources. In contrast, it may take you hours of research and months of practice to figure out how to go about effectively cleaning your credit.
Also know that by law, credit repair organizations cannot accept payment for services before they have been rendered. This is because many fraudulent credit repair companies will charge hundreds of dollars or more immediately and then never provide the help you were looking for. Any credit repair company that requires a large upfront payment should be avoided.
Look at the credit repair services being included
A credit correction organization is legally able to provide the same credit repair services you can perform for yourself, but this does not mean that all do. Many credit repair firms only provide credit bureau disputes which can be effective for some people, but are usually less successful and take more time than pairing credit bureau disputes with other credit repair methods.
Look for experience and a history of results
While no credit repair company is perfect and the success of any effort to repair your credit is reliant on your creditors and the credit bureaus, an experienced company will likely produce faster and more meaningful results than a relatively new company that is still experimenting with their customers’ credit reports.
Pay attention to the price tag
As with any service, the goal is then to get the best value for your dollar. To determine this, find out what services you will be receiving for your money and make a reasonable estimate of the quality of these services. This should help you get a feel for how companies compare to each other. For example, if one service charges $49 per month for credit bureau disputes and has been operating for only 2 years or less, you are probably better off contracting with a competing service for $20 more per month that also provides creditor interventions and has been in business for a decade.
Above all, use your common sense
Just as you would at any other time when someone is asking you to part with your hard earned money, when you are looking at a credit correction company, trust your instincts and remember the old adage of anything that sounds too good to be true, probably is.
You should be completely confident that you are making the right choice. It is your credit score that is on the line and your money that is being invested. Don’t let anyone pressure you into something that doesn’t seem proper.
Millions of adults across the U.S. struggle with the consequences of having bad credit. Some are turned down for credit cards or car loans, others learn their applications for a new home loan have been denied. If you’re dealing with the restrictions that get imposed on people with poor credit, you may already realize that your credit score is in need of repair. These days, getting information about how to repair your credit rating doesn’t have to be frustrating or stressful, thanks the abundance of credit information and resources available to consumers.
Credit scores are a tool used by businesses and lenders to determine the likelihood that a consumer will repay their loan. Fortunately for those with lower credit scores, these figures are not set in stone. It can take time, but there are things you may be able to do to improve your credit score.
For some, bad credit loans are a necessary tool for purchasing a home or buying a new a car. They have the steady income required to make these purchases, but their credit scores are too low to get approved for a standard interest rate loan. A bad credit loan gives them an avenue for making a major purchase and a means to begin building good credit that, if they continue to act responsibly, will help improve their credit scores over time.
But bad credit loans have a heft price. Because of the much higher interest rates, a person with a bad credit loan can expect to pay hundreds of dollars more every single month for the exact same home than a person with a high score. When applied to an entire 30 year mortgage, these additional payments can add up to hundreds of thousands of dollars. Those hundreds of thousands of dollars are the cost of using a bad credit loan.
This demonstrates one of the costs of bad credit, and in many cases, a cost that is not necessary and not fair. Bad credit loans are structured the way they are to help protect lenders. Lenders collect more than the original value of the loan to protect themselves from losses caused by people defaulting on their loans. When approving bad credit loans, lenders expect a certain percentage of people not to pay off the loan, so they make sure those who do make their payments pay extra to equal out those who don’t. When you make a payment on a bad credit loan, you are paying on your loan and on the loans of all the people who stopped making payments.
But what if you aren’t a high credit risk? If you are a responsible consumer who can be trusted to repay your debts, is it fair that you have to pay extra to cover all the people who are not responsible?
If your credit rating is making you seem like a less credit worthy person that you really are, you are not alone. There are many, many people out there whose credit scores do not accurately portray their true credit risk. Their poor credit rating gives banks and lenders the impression that they are not credit worthy when in fact, the opposite may be true. Credit repair is the tool thousands have turned to in order to make sure their credit reports are an accurate representation of their true credit worthiness.
Using credit repair, people have been able to significantly increase their credit scores so they don’t have to settle for a bad credit mortgage loan.
For every person that advocates the use of a credit repair company, it seems like there are two more that are trying to convince you that credit repair companies are nothing more than a complete farce. But when you think about it, if there is no such thing as a real credit repair organization, why are there federal laws regulating how a credit repair company should operate instead of legislation outlawing the practice? Why does the Federal Trade Commission make the distinction on their website of “a legitimate credit repair operation” and why do they provide information to help you shop for a credit repair service? Why if offering credit correction services is such a deceptive practice are there large and very public firms who have been doing so for many years? And why, if credit repair services are all a scam, are there so many thousands of people who have had so much success repairing their credit with the assistance of a credit repair expert?
It should be pretty obvious by now that there is such thing as a legitimate credit repair company. If you take some time to understand more about credit repair, you can see why this is is so. As has been argued many times by critics of credit repair services, there’s nothing a credit repair company does for you that you cannot do for yourself. The critics are correct on this point.
Credit repair organizations don’t do anything you cannot for yourself. You have the right to dispute any questionable negative listings in your credit reports directly with the credit reporting agencies. You also have the right to work with your individual creditors to try to get them to stop reporting damaging items on your credit file or start reporting positive items. You also have an assortment of rights under the FCBA and the FDCPA to forcefully demand that creditors and collectors stop reporting negative items and all of this can be done by yourself, in the comfort of your own home, and at very little cost. Of course, this could be said for many of the services you pay for already.
Credit repair firms perform these tasks for you. Much like a mechanic you pay to maintain your car, you are paying a credit repair organization to provide a service you have the right to perform for yourself. But as is also the scenario with these other services, when using a credit repair company you are taking advantage of their knowledge and experience. And in the end, you will probably end up with better results achieved in less time than if you had elected to tackle the job on your own. You may also find that the saved time, effort, and frustration easily outweighs the cost of attempting to do the job yourself.
Credit repair works; the countless number of people out there who have increased their credit rating after proactively working to repair their credit is proof of that fact. And since credit repair firms perform the same credit repair tasks for you, providing you opt for a legitimate credit repair firm like Lexington Law to help you out, using a credit repair company works as well if not better than working to repair your credit report yourself.
More than ever before, credit repair is becoming a necessity for people looking to get into a home or make other purchases on credit. Because of the current credit crunch, lenders are being forced into lending only to the most qualified recipients meaning that in some cases, a 700 credit score simply isn’t good enough.
As home prices continue to fall, those with excellent credit are being presented with the opportunity to take advantage of home bargains. But unlike previous years where people with sub-prime credit scores could still get into homes, albeit at a higher interest rate or using a non-conventional mortgage, people with low or in some cases average credit scores are being left out.
Looking for a way to more quickly raise their credit score than simply waiting for it to improve on its own, many of these people are taking advantage of the many credit repair resources and services available to them. By actively working to remove bad credit from their credit reports while also effectively managing the addition and reporting of good credit, these people are finding it possible to repair their credit reports and qualify for new loans in a matter of months instead of years.
Repairing your credit is something you can do on your own at very little monetary cost. It will, however, likely take quite a bit of time to learn the best methods for effectively working to improve your credit. For someone new to the credit repair game, you may be able to see positive results in little over a month by researching best practice for credit bureau disputes and putting those practices into effect. Realizing more dramatic results may then require significantly more time researching, frequenting credit repair forums, and working the system.
For those people who do not have the time or desire to learn how to repair their credit themselves, there are a number of reputable credit repair companies who will, for a fee, manage the process for you. These companies typically provide credit bureau disputes, creditor interventions, and credit score coaching.
As is the case with any services industry, and especially so in one that deals with something as complicated as the credit reporting system, there are those who look to take advantage of people. These credit repair scams can usually be identified by traits such as accepting large upfront payments, not informing you of your right to repair your credit on your own, or guaranteeing to give you a great credit score. The “if it sounds to good to be true, it is” adage is a good starting point when looking at a credit repair offer, but for a more detailed description of what to look for in a credit repair scam, the Credit Repair Organizations Act is a good resource as it is the federal law regulating all credit repair organizations.
Whether you choose to work on repairing your own credit, to enlist the help of a credit repair company, or opt for a blended approach where you start with the easy stuff and then use a professional to do the heavy lifting, credit repair may be the tool you need to take full advantage of the credit crisis.
Negative listings on credit reports have some of the biggest effects on your credit score. A few delinquent payments can be the difference between getting approved for a good interest rate on a loan and having to make a large down payment in order to even qualify for financing. Major blemishes like charge-offs, liens, and foreclosures have the potential to drop your credit score so much that you will have difficulty getting approved for credit, regardless of the terms.
So what do you do when there are negative items on a credit file that should not be there? Mistakes do happen and damaging listings are incorrectly added to peoples’ credit reports all the time. And what about negative listings that are accurate but there was a legitimate reason behind them? Is it fair to have to deal with a poor credit score for up to 10 years when the blemishes in your credit history were completely outside your control?
The Fair Credit Reporting Act provides consumers with a few options for dealing with bad credit, and enforcing their right to a fair and accurate credit score. This includes your right to order free copies of your credit reports so you can see what information is being reported about you as well as the right to request verification of any items on your credit reports that you feel may be inaccurate, untimely, misleading, incomplete, ambiguous, unverifiable, biased or unclear.
Another antiquated option you have as a result of the Fair Credit Reporting Act is the ability to add a one hundred word statement to your credit reports explaining to creditors the circumstances behind negative items on your credit reports. The idea is that when referencing your credit reports, lenders will be able to take into account the reasons behind these negative listings when considering your loan application.
What makes this statement antiquated is that these days, lenders rarely consider the individual listings in your credit reports. In fact, they may never see your reports at all so your meticulously crafted 100-one hundred word statements would never be read.
On top of that, lenders are primarily interested in your credit score, which does not take the one hundred word statement into account. No matter how good your justification is for having a negative listing on your credit reports, your credit score will remain unchanged.
The only way to keep negative items from lowering your credit score is to have them removed from your credit report. One option people have for attempting to do this is the credit bureau dispute described in the Fair Credit Reporting Act. Additional credit repair options are made available through a number of other consumer protection acts targeted towards creditors and collections agencies.
