So how do credit repair companies fix your credit? Sometimes they do want to help their clients; they're just interested in making a quick buck. These companies, like any other company in any industry, often do things that are not even legal. We've got the scoop on what to watch out for so that you know you're hiring a good credit repair company; and what to expect.
FTC Warnings on Credit Repair Companies
Of course, the Federal Trade Commission (FTC), has a few guidelines or warning signs of credit repair companies that use scams. The main warning signs of Credit repair scams, according to the FTC, might include:
1. Any credit repair company that wants you to pay for their services before they provide services to you. Credit repair companies are services should never require you to pay anything until they have completed the services that they have guaranteed.
2. Credit repair companies that don't bother telling you your legal rights or what you can do by yourself for free, to save money. This is also a scam. If the credit repair company doesn't legitimately want to help you and is just after your money for any little thing they can get, that is a scam.
3. A credit repair company that advises you to dispute anything in your credit report that is accurate, but claiming that it is in accurate, or basically anything that seems illegal such as creating a new credit identity is a scam. In fact it's not just a scam, but it is illegal and even if you follow their advice you could be committing a felony and be subject to being prosecuted.
4. Any credit repair company that recommends to you that you do not contact your credit reporting company directly might be a scam.
Claiming Identity Theft
Many times, these credit repair companies will have the consumer report some of their debt as fraud. For example they might fill out a police report or report to their credit card company that the credit card has been compromised and that the purchases made were not theirs. Although this can definitely help alleviate some of their debt, it is definitely very illegal to do this. It is also quite bad for the economy, and unfair for the business that will be losing money over the fraud.
There are also laws to keep you protected against credit repair company scams.
1. Credit repair companies cannot make any false claim about their services
2. Credit repair companies cannot perform any services until the credit card company has your signature on a contract that has been written and both parties have completed the three day waiting period. During this time you're able to cancel the contract freely without paying any fee.
3. Credit repair companies cannot charge you until they've completed the services that they promised to you.
Many credit repair companies are actually very legitimate, and really want to help their clients repair their credit and get out of debt. Many credit repair companies will also be listed on the Better Business Bureau (BBB), which of course is a great plus.
Why Hire a Credit Repair Company?
Some people report being screwed over by banks, or defrauded by mortgage brokers or car dealerships. They choose to take advantage of any loopholes that a credit repair company can offer and help out with to improve somebody's credit score.
How Fast is Credit Repaired?
Many consumers who have reported using credit repair companies have reported seeing results in less than eight months. Some people don't know exactly how the credit repair companies work, but they are happy to report that if it works; it works. As a former collection agent, and also as a person who actually used a credit repair company before to fix my personal credit score, I can guarantee that there are very good and legitimate credit repair companies available, and they work wonders.
If somebody has a credit score that is so messed up a good credit repair company should be able to bump them up enough points that they can apply for with a decent mortgage, get approved for a loan, or look better when a job runs a credit check on that person.
How Credit Repair Companies Help
There are three major ways that credit repair companies may work to repair somebody's credit.
1. Credit repair companies may ask your client to forward them a copy of their credit report. This can be done using services such as Equifax, Trans Union, or Experian.
2. The credit repair company will then recommend to the client which item on their credit report they could dispute.
3. The credit repair company well sometimes contact the credit reporting agency and challenge any questionable items on the clients credit report.
There are several steps that a credit repair company can take as they have professional backgrounds in the business. This gives them a major advantage over an average consumer. The dispute inaccurate items, but they also educate people. Credit repair companies, at least legitimate ones, would never recommend the people attempt to mislead any bureaus however they can dispute every negative item by asking them for some sort of validation. Any item that is unverifiable is actually an in accurate item. That could potential he belong to somebody, but after a collection agency have added their own fee to it that consumer will owe a lot more than their original debt and the agency might not have any rights to collect an additional fee. So in this case, a consumer is better off requesting a validation, and if a validation isn't possible they are able to save a few dollars by dealing with their original creditor directly.
Credit repair service experts have experience in analyzing credit reports, credit profiles, and are experts in making suggestions. Because of their skills in analyzing credit profiles, reading credit scores, doing a lot of research, figuring out how and where they can boost a credit score, and their superior skills in negotiations, it wouldn't be fair (or accurate) to say that anybody could fix their own credit score.
Did You Know?
When you pay off a debt collection, it generally does nothing to improve your credit score. However a professional credit repair agent is able to negotiate with collection agencies and have them remove it completely as long as you decide to pay it off. The average person may not know exactly how to do this, however as long as they have the knowledge of how to do this then they can probably do it themselves. It's something that you need to be very good at. The same way that if you learn how to fly an airplane you can become certified.
If you learn how to install a motor in your vehicle, you probably don't need to hire a mechanic. In the same way, you may need to hire a professional credit repair service if you don't know how to do this yourself. Negotiations and gathering information are generally key in the credit repair industry. Most people, on average, don't even know how to read credit reports. This is why it is so important to hire a credit repair company.
It should be known that a credit reporting agency is obliged under the Fair Credit Reporting Act (FCRA) that they are required to correct or delete any inaccurate, unverifiable, or incomplete information within around 30 days. They do not have to remove any inaccurate information unless it happens to be over seven years old, or for bankruptcies anything over 10 years old. When the information that was challenged is confirmed, it then gets removed. That's what credit repair companies usually do to repair their clients credit. They write and send dispute letters; and it's something that they are generally very good at doing.
Credit Repair Services Contract
If you decide to use a credit repair service, you must sign a contract to make sure that you are protecting yourself and getting what you pay for. Your contract should definitely specify a few of these points outlined:
1. Length of time until you can expect results
2. Any and all payment terms for the services you require. This must include the total cost of the credit repair service.
3. Detailed description of all services that you can expect to be delivered.
4. The credit repair company name and their business address.
5. Their guarantees
Do Your Homework & Stay Involved
Since many consumers do not understand how credit repair services and processes work, they may expect miracles. However a lot of the services like charge off removal do the best that they can to boost their clients credit score as much as they possibly can. This happens with a lot of analyzing, a lot of negotiating, paperwork, and re-assessing. Repairing credit requires consistency, patients, and also some involvement on the clients part.
A credit score repair is not something that will ever happen overnight, there are no miracles involved. Some items may permanently come off the report, and some may not. However, it's always important to keep working and staying involved in your credit repair until you have achieved your desired results.