The Frugal Creditnista

Credit Repair Companies – Revealing The Truth

I read a lot about the finance industry, from personal finance tips to ways on increasing your credit score to companies to stay away from when getting back on track to financial solvency, and I must say, most people who write about credit repair companies don't know squat!

It's really surprising that they call themselves ‘experts' when they really just regurgitate the same mis-truths that have been spinning around for years instead of doing the real work of investigation that comes with being an author. I mean, a very well respected personal finance guru actually told a person writing in that there was nothing she could do about her bad credit but wait for it to fall off! What?! 

Here's the deal.  You can repair your credit and it is legal for a credit repair company to assist you. The Fair Credit Reporting Act makes it possible for you to challenge negative information on our credit reports.  Over 40 million Americans today have errors on their credit report; making those items eligible for deletion.  Now, if you are a company that makes billions of dollars storing and selling this information, how would you feel about businesses out there that educate consumers about their state and federal rights to challenge these errors, have them permanently removed from their credit reports, thereby improving their scores?  Not too happy with them right?  

Let's face it; these private. FOR PROFIT billion dollar companies – Equifax, Experian and Transunion – make a TON of money reporting and selling products to consumers and companies on bad credit.  We cut into their profits by successfully removing bad credit from consumer's credit reports!  So, they've put out information to confuse the consumer who could really benefit from having a professional on their side.  It's not all non-truths; they simply put out 1/2 truths and pump those up until they're believable.

So, let's address some of these partial truths.  

1.  There's nothing a credit repair company can do for you that you can't do for yourself.  

This is true. Just as you are able to file your own taxes without the use of a Tax Preparer/CPA or purchase and sell a home without a Realtor, or make investment decisions without a Financial Planner, you can repair your credit without the use of a credit specialist. So… why use one?  The same reason why you would use a tax preparer, realtor and financial planner!  You want someone who is well versed in the law, is extremely educated on consumer rights as it relates to Federal and State laws, and who is experienced with how to handle 3rd party debt collectors, credit bureaus, and original creditors.  Someone who's read and is educated on the Fair Credit Reporting Act, the Fair Credit Billing Act, the Fair Debt Collection Practices Act, the Telephone Consumer Protection Act; the Fair and Accurate Credit Transaction Act (2003); state laws and case laws; just to name a few.  To think that an average consumer would read through all of this is ludicrous.  Now, I have had some people be very successful in repairing their credit and have taken the time to do this; and I applaud them for this.  Similarly, I've had people sell several properties without ever paying a commission fee to a Realtor, kudos to them.  The average consumer, however, does not have the time or the desire to do this.  Plain and simple.  If you want proof, look up lawsuits and any of the 3 credit bureaus.  You'll see the millions of dollars they've had to pay out for blatantly ignoring disputes with proof of inaccuracies from consumers who were repairing their credit on their own.  

2.  Do not trust any company that charges up front. This is partially true.  The whole truth is that there are companies and professionals who are exempt from the Credit Repair Organization's Act (CROA) rule and who can charge up front fees; these vary slightly from state to state but for the most part include:  non-for-profit 501(c)3 companies, government agencies, attorneys, real estate brokers, loan officers, and debt counseling companies who are acting in the course and scope of their profession/license.  If you'd like to learn more on this Google your state's CROA laws (yes, it's that readily available).

3.  You cannot have true information removed from your credit report. Well, if the event is true but is reporting incorrectly, it can be removed.  I can't tell you how many bankruptcies I've seen reporting the discharged amount as $0.  REALLY???  Someone filed bankruptcy because their $0 debt was just too much for them to handle!  Yes, information that has really occurred can be removed from your credit report.  We've had 1000s of public records removed because they were not accurately reporting on our client's credit reports. Wrong counties, wrong courts, wrong amounts, wrong account numbers, wrong dates, wrong, wrong, wrong.  Which is why we delete, delete, delete!

4.  Negative information has to remain on a credit report for 7 years.  NO.  The law limits negative credit information on a credit report to 7  years (in some cases it's 7 years & 6 mths or 10 years); meaning it can come off anytime before that.   This means that nothing has to stay on your credit report at all.  As a matter of fact; none of your creditors have to report anything on your credit report; that's all voluntary.  Thus, negative information does not have to remain on a person's credit report for 7 years.

5.  Only Consumer Credit Counseling Services (CCCS) can legally help you fix your credit.  Are you kidding me?  You'd be amazed at how many of my clients come to me after a CCCS has screwed it up!  Not to say that they're all bad; I've referred some of my clients to them when they needed to get a handle on debts because they'd gotten way over their heads; I give my clients all their options from debt consolidation, debt management plans (which is what consumer credit counseling is), debt settlement, and bankruptcy; along with the pros and cons of each.  From there it's a personal decision. 

Nonprofit consumer counseling services are funded and regulated by credit grantors and credit bureaus. Gasp! That's why they direct you to them!!!  When you work with these agencies, there is a note placed on your credit so that any lender that pulls your report knows you are paying your debts through a debt management plan with a CCCS.  Lenders view this just as negatively as a Chapter 13 bankruptcy.  Don't believe the hype.  CCCS are not credit repair organizations; they are debt counseling agencies that help you pay your debts by creating a plan to pay off all your debts.  That's it.

6.  The credit bureaus lets me submit a 100 word statement to explain my story to potential lenders that I want to do business with in the future.  Yes, they do allow you to submit a 100 word statement; but what you don't know is that you have just admitted all this negative debt is yours,  You're basically saying, “Yes, I could not pay this debt because…”; it does not change your score or the information on your credit report; and you've done nothing to improve either by submitting this statement.  In reality, you've just made it harder to dispute any errors that are reporting in the future. Further, lenders don't consider the information you've submitted in your statement.  They could care less; they only review the data that their system pulls from the credit bureaus about your credit worthiness.  Therefore, if you've submitted a 100 word statement to the credit bureaus, ask that it be deleted immediately.

7.  If credit repair companies are successful at getting anything removed, it'll just come back on in the future.  Another partial truth spread like wild fire by the credit bureaus via the media, finance ‘gurus' and government agencies.  The truth – once legally removed it cannot be put back on your credit report.  If the creditor initially verified the item the account may still be deleted at a later date as the credit repair process intensifies.  Further, if an item was deleted due to a slow response time by a creditor; the credit bureaus must notify you in writing 5 days prior, or it must be deleted again. Some times collection agencies will sell a debt and the new collection agency will report it; they'll just have to re-delete it.

8.  All credit repair companies are scams and are not to be trusted.  Every industry has some unethical members and the credit repair industry is no exception to that; you can Google crooks in every industry known to man and will find many faces.  However, to state that an entire industry is wrong is just…. wrong!  Especially when you have professionals such as myself and my team who go above and beyond to operate ethically, morally, and with integrity and who genuinely care about the clients we help.  It should not surprise you by now that a lot of the negative information about credit repair organizations stems from credit bureaus themselves.  They've publicly admitted that over 30% of the disputes they receive come from our industry and it ads to their overhead and directly affects their revenue.  They hate us. The work we do, however, is vital.  We help our clients save thousands of dollars in interest rates, loan terms, insurance premiums, rent payments, utilities AND MORE.  Where's the scheme in that?

I hope this helps!  Hopefully yours eyes are open now to the real schemers out here.  And if you need assistance getting your credit back on the right track; please do not hesitate to reach out to me.  I'd love to help!

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