James Hussher asked: There are a lot of “credit repair” companies out there, and they promise a lot. How good are their promises, and what can they really do for you. We will take a look at the realities of the credit repair business in this article.
Credit Repair involves a company contacting the three major credit bureaus for you, on your behalf, and disputing derogatory items on your credit report.
Understand this, first of all: the purpose of the three major credit bureaus, Equifax, Transunion and Experian, is to accurately report a client’s credit and payment history to potential lenders.
They generally do a very good job of fulfilling this mission. If items are true, you really have no right to expect those items to be removed before seven years have passed, or, in the case of bankruptcy, ten years have gone by.
That being said, the credit repair companies basically exploit a part of the law, under the federal Fair Credit Reporting Act, which states that a consumer has the right to dispute any item they feel or believe to be inaccurate on their credit report. A disputed item can be presented to the merchant who granted the credit, and that merchant has 30 days to validate that that debt is correct. If the merchant fails, for any reason, to verify that debt as accurate within a 30 day period from the time the dispute is filed, then, by law, that derogatory item must be removed from your credit report!
In the real world, especially during the Christmas holiday season, merchants often do not have a chance to respond within the required 30 days and verify legitimate debts, so the credit repair company will then be able to have that derogatory item removed. Other merchants may have gone out of business, etc., so it is not necessary to wait a full 7 years to have that item drop off your credit report.
You as a credit consumer can dispute any item on your own credit report. Are you able to do that? Are you a good letter writer? Do you know how to navigate the complexities of obtaining and updating your reports? Some people can, some people cannot. The credit repair companies will do all this work for you. And they are good at it, they do it every day, all day long.
There are a lot of credit repair companies, however, that promise too much, and charge too much up front. Some companies want you to pay hundreds of dollars up front before they go to work for you.
A good credit repair company will charge you by the month. The first month may involve a small set-up fee in addition to the monthly fee. You are not committed to a contract, you use their services for as many months as they need to get your credit scores improved sufficiently. For example, $75 to set up and $49 a month, no contract.
Under the law, a credit repair company cannot usually obtain your credit reports for you, they will advise you as to how to obtain them, whether for a fee or free. You need to provide them with your credit reports that they can work from to begin the repair process.
Everyone has a right, under federal law, to a free annual credit report. Google this and you will find the site for this.
I am a mortgage broker and I deal every day with clients whose credit is not up to snuff, and I do have a credit repair company I refer clients to, and, 3 or 6 months down the road, they are in better shape and I can then help them get the loan they seek.
As always, seek the advice of a certified financial planner or mortgage planner when you begin the credit repair process, so you can steer clear of the scammers and get aligned with a good credit repair company.
Stacey
