Credit Repair Agencies

Following on from Credit Repair Agencies PART1

If you have been suckered in and do follow illegal advice to commit fraud, you will find yourself in major legal difficulties. It is a federal crime to lie on a loan/credit application, to misrepresent your Social Security number, and most seriously, to obtain an Employer Identification Number from the Internal Revenue Service under false pretences.

You could be charged and prosecuted for mail or wire fraud if you use the mail, telephone, or Internet to apply for credit and provide false information.

So what is the answer – do legitimate Credit Repair Companies exist?

The answer is a very reluctant yes, legitimate credit repair agencies do exist but given the relative ease of correcting your own mistakes in your credit file, their effectiveness and value is questionable.

Consumers can already dispute mistakes in their credit files for free. But it will take time – applying for your credit reports, reviewing and highlighting errors, documenting the mistake, typing up your letter and mailing it. Several hours at a guess – but worth it for saving hundreds of dollars.

The typical service offered by a Credit repair services is to do this legwork for a sizeable fee. They will obtain a copy of your credit reports, review them for errors and send out dispute letters along with documentation, all things you can do yourself. Yes – they save you some time but the fee spent would negate this and then some. Erasing bad credit – forget it.

The most important thing to remember is that these repair services don’t have any secret methods for erasing bad credit. They don’t have the right to remove accurate and current information from your credit report however bad. FACT – Credit repair services can’t do anything for you that you can’t do for yourself. For free.

So, the task of trawling through your credit history is proving to be a job too far, how do you find a reputable Credit Repair Agency?

Like most things in life, it pays to do your homework. Go online and research the company before you contact them. Speak to the Better Business Bureau to see if there is a history of consumer complaints. Verify with your state’s consumer agencies and States Attorney Generals Office to find out if there are any pending legal investigations. Don’t however rely on chambers of commerce or other trade associations where membership is based solely on a fee as their opinion might not be neutral.

Finally take time to know your rights. Credit repair services must follow specific guidelines from the Credit Repair Organizations Act, intended to protect consumers from these very types of scams. You should receive an explanation of these rights before signing a written contract. Read them and be sure you are happy. If there is a request for cash up front – RUN.

If you do proceed you should receive a contract with all of the following information:

• The payment terms for services, including their total cost
• A detailed description of the services to be performed
• How long it will take to achieve the results
• Any guarantees they offer
• The company’s name and business address

Ensure they have offered a grace period. The credit repair company cannot perform any service for you until you’ve signed a written contract and completed a three-day waiting period. You may cancel the contract without paying any fees during this period.

As a footnote it is worth mentioning that the FTC cites “Credit protection and credit repair” scams as one of the top consumer complaints reported. The actual losses to consumers by these scams are difficult to calculate because many people are too embarrassed to complain but estimates put the losses easily in the millions.

Credit Repair Agencies

Are companies which claim to be able to fix or erase bad credit too good to be true? Well, in a word YES – in a lot of cases.

As with all walks of life there are good and bad, however when it comes to matters of finance and money when the going gets tough the tough get sneaky – out of the woodwork appear huge numbers of companies and individuals making promises they cannot backup, and this current financial turmoil is no different.

You will have seen advertisements in newspapers, on TV, and on the Internet from credit repair agencies offering credit repair services. They all make the similar claims:

“Credit problems? No problem!”

“We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!”

“We can erase your bad credit — 100% guaranteed.”

“Create a new credit identity — legally.”

Let us start with a basic guide on the above statements – any company which makes these type of claims is most likely up to no good. The law is VERY clear on credit repair – bad but accurate credit information cannot be legally removed from credit files, and for the record, nor can new credit identities be created, bad loans be removed and so on. The fact is there’s no quick fix for creditworthiness – if it is bad and bad for a reason then sadly no amount of trickery is going to help you – hard work however will. You can improve your credit report legitimately, but it takes time and effort – there are no quick fixes.

Recognizing Credit Repair Scams

Each and every day, nefarious credit repair companies target consumers who have poor credit histories with promises to clean up their credit report, helping them to get a vehicle loan, a cheaper home mortgage, insurance, etc – once they pay them a fee for the service. That last bit is the real clincher….

These companies cannot supply you with an improved credit report for you using the tactics they promise. As stated previously - It’s illegal: No one can remove accurate but negative information from your credit report. So having paid hundreds or even thousands of dollars in fees up front you are left with the same poor credit report and they have your money.

So, how to tell if the credit repair agency is up to no good:

• Well, most importantly – they demand money up front. If they ask for money in advance the advice is simple – WALK….Under the Credit Repair Organizations Act, credit repair companies cannot require you to pay until they have completed the services they have promised.

• The Credit Repair Company doesn’t inform you of your rights and what you can do for yourself for free.

• The company tells you they can get rid of most or all the negative credit information in your credit report, even if that information is accurate and current.

• They recommend that you do not contact any of the three major national credit reporting companies directly.

• The company suggests that you try to invent a “new” credit identity — and then, a new credit report — by applying for an Employer Identification Number to use instead of your Social Security number. This is fraud and can get jail time.

• The company advises you to dispute all the information in your credit report, regardless of its accuracy or timeliness. This wastes your time and that of the credit agencies – hardly a way to impress them!

To continue reading see Credit Repair Agencies Part 2