Credit Repair Offers: The Good, the Bad, and the Ugly

Credit Repair Offers: The Good, the Bad, and the Ugly

If you are struggling to pay your bills, you’ve probably received more than one credit repair offer. They sound incredibly enticing with offers such as “Increase your FICO score” and “Eliminate bankruptcy, liens, and judgments.” But can these credit repair companies really deliver the goods? Let’s take a closer look at how credit repair works:

What Is Credit Repair?

Credit repair is a service the offers to improve your credit score. The companies claim that they can clear up negative data on your credit report and bring your FICO up to a level that will help you get the credit you want.

How Does Credit Repair Work?

Typically, credit repair companies will order all three of your credit reports and examine them looking for ways you can improve your score. In some cases they will find inaccurate data which they will then dispute with the credit bureau. In other cases, they will negotiate repayment plans on your behalf. For example, if you owe a large amount of debt on a credit card they might negotiate with the lender to accept a repayment plan. However, what a credit repair company does will vary and depends directly on what your agreement stays.

Is Credit Repair Legal?

There are credit repair companies and credit repair scams. It’s important to know the difference. Credit repair companies are required by law to:

  • Never make false claims about what they can do. For example, they can’t claim they have the power to remove legitimate bankruptcy from your credit report.
  • Provide a detailed written description of what services they will perform.
  • Provide you with the total cost of the service before they begin work.
  • Only charge you for their services once they’ve done their job.
  • Give a deadline for when they will complete their service.
  • Refrain from performing any service without your written approval. In other words, they can’t accept a repayment plan from creditors on your behalf without your approval first.

It’s also important to note that once you have signed a credit repair service agreement, you have three days to change your mind and not be charged anything.

Credit Repair Scams

fake-scam-bubbleCredit repair scams seem on the surface to be legitimate, but one of the main giveaways that they’re in fact scams is that they make impossible offers such as guaranteeing they can eliminate all of your negative credit history. Below are some illegal things credit repair scammers do:

  • File segregation. Some credit repair scammers will take your money and “eliminate” your negative credit history by creating a new credit file for you. One way of doing this is by using a new social security number or EIN. This is illegal. If a so-called credit repair company asks you to do this, then they’re probably scammers.
  • Payment upfront. It is against the law for credit repair companies to demand payment before they’ve completed their service. If a credit repair company demands upfront payment, you’re probably dealing with a scammer.
  • Oral promises. By law, credit repair companies are required to provide you with a written agreement that details services to be rendered, a timeline, and total costs. If the company refuses to provide this information, you’re probably dealing with a scammer.

Do You Need Credit Repair?

The truth is that no credit repair company has the ability to do things that you can’t. You have the power to correct errors on your credit report and negotiate with creditors.

The next time you get a credit report offer carefully vet it to be sure it’s not a scam and that you really need their help.