What's The Point Of Credit Repair Companies? (Not Much)
If you have bad credit and have been thinking about working with a credit repair firm, think again. Credit repair services aren't doing anything that you can't otherwise do for yourself. They review your credit history, lodge disputes, follow up, rinse and repeat. The appeal of a credit repair service is that they spend all that time resolving issues so that you don't have to. They can't take legitimately negative things off your record and they can't work magic. Any firm that promises or guarantees to improve your score isn't telling you the whole truth and you should watch out.
If you think about how the credit score works, there is really only a handful of things that you can change or remove that will be of any benefit. It pretty much comes down to removing negative items from your report and those come in two varieties - accurate and inaccurate. The inaccurate ones are easy to get rid of, the accurate ones are not.
All you need to do to remove an inaccurate item is to dispute it and follow up. This can take quite some time and so herein lies the appeal of credit repair companies. The question you must ask yourself is whether you want to pay someone to do this or if you would rather do it yourself.
How about the accurate negative items? There are cases where credit repair services have gotten negative legitimate items removed - they simply ask politely. Much like how you can get a fee refunded, you can often ask a creditor to remove a negative item because you've had an otherwise stellar history with them. Many companies are willing to do this if you are a good customer because it comes at no cost to them. Again, you can do this yourself or pay someone to do it for you.
Finally, repair companies, both reputable and disreputable firms, will send letters disputing all negative items on your report without regard for its accuracy. If a credit doesn't respond within 30 days, that information is deemed unverified and subsequently removed. While not ethical, you can do this yourself. Don't get your hopes up though, this is often easily verified.
It's important to know that legitimate credit repair companies aren't miracle workers, they simply push the paperwork on your behalf. Unfortunately, you have to wade through a lot of fly-by-night scams to get through to legitimate companies. My recommendation is that you skip the services, save your money, and learn how to do it yourself.
Jim writes the blog Blueprint for Financial Prosperity.
Post a comment
Comments:
To Quote Dave Ramsey:
"All businesses are in business for one reason... to make money"...
..."If it sounds too good to be true... it is"
I've personally used Lexington Law and they've done a terrific job for a very reasonable price. They aren't miracle workers but they've gotten a lot of negative things removed from my credit history after I was forced into a bankruptcy.
My credit is back in the high 600's not even 3 years from my bankruptcy.
Why is it unethical for you to dispute all the negative items on your credit report? If all credit repair companies, reputable or not are doing it, what's the difference if you do it yourself? If it is current and accurate (and sometimes even if it isn't), the company will verify it within the timeframe and it stays.
Working with a credit company got me over 200 points better score. You just need to go with someone who likes their job. My guy hates the credit companies and does anything possible to make their lives miserable until they remove things from my history.
OK, let's say I don't have the time to do this myself, and/or tend to fold under pressure on the phone. Therefore I am willing to pay a legitimate credit repair company to do this. How do I find a legitimate credit repair company? Are there any to recommend? This would've been a good addition to this post, even if DIY is best; sometimes the second-best option is okay too.
Here's another thing I learned to watch out for when I worked collections.
You also have to be careful with the debt consolidation companies as well. They do work but you should really try all possibilities of trying to work it out on your own. They will lower your balances, by cutting deals with creditors, but the use of these companies will also show up on your credit report which shows you have credit issues and could lower your fico score. Just goes to show that, with debt, it may not be easier, but it's better to work to get things in check on your end before seeking help from one of these companies.
Well saying there is nothing they can do that you can't is kind of misleading. You can buy a home on your own too, but a realtor can make the process much easier for most.
@picardia:
One good place to start is knowing that no credit repair company can legally charge you any fees without first doing something for you. That is a federally mandated act, so any firm wanting money up front should be one to watch out for. If I'm not mistaken the act is called CROWA, I can't find anything on google, but if you can find it it would be a great tool to educate yourself.
If you are looking for some assistance with debt, as well as credit, I suggest you give HomeFront Financial Group a call. They do debt settlement, but they also offer free credit repair after. Sadly, I don't know of any good credit repair only firms. Good luck though!
@alterboy:
A consolidation company will never lower your balance. They only alter interest rates.
A settlement company could get your balanced reduced, but they don't do that by "cutting deals with creditors" in any way. But of course, any time you alter anything that is on your credit it will have an impact.
I had gone through one, and after a year and a half, all they took care of was one creditor that violated a cease and desist order against contacting me.
After three violations and a chance at the creditor possibly paying me close to $2,000 if I took them to court, they wrote off the account.
I could have done that myself with an answering maching.
They are a waste of time and money.
I have a lot of "in the trenches" with credit repair, working on both my own behalf and helping others. I was able to boost my wife's FICO by over 200 points in about four months, as an example. A few clarifications:
Inaccurate information is not always easy to get rid of. I may come down to suing the bureau or the information furnisher (or both) to get it enough attention paid to you for that to happen.
Unverified information doesn't always (or even normally) get removed after 30 days. You generally have to be very aggressive about holding them to that deadline. This is done by staying off the phone and sending all correspondence via certified mail. Their are also a bunch of caveats too: the bureaus can take upto 45 days to investigate items if you're using your free annual report as the source, they can flatly deny your request if they tell you they consider it "frivolous," etc.
Finally, removing bad info is only half the battle. Just as important is establishing good credit. This means getting secured credit cards, using cosigners, finding subprime cards that don't bend you over too much, etc.
I will agree that credit repair companies are a waste. They will probably help you a little, but you can do a *much* better job. I've sued (and won $1000 from) a collection agency, called and negotiated with creditors, send emails to executives I found via Googling, etc. No company will go that distance to help you. They just fire off form letters--which is an important part of the process, but only a fraction of it.