There has been a massive increase in the number of companies offering credit repair services. The firms that offer these credit repair facilities claim they can get instant results for a fee so we decided to get the straight facts for you. Based on our cursory review it seems the FTC (Federal Trade Commission) and credit reporting agencies frown upon these credit repair services so let’s find out why shall we? For the sake of convenience we are going to provide some points and then elaborate on them below.
- What Is Credit Repair And Why Do People Need It
- How Much Does These Credit Repair Facilities Cost?
- Effectiveness Of These Credit Repair Services
- Food For Thought
What Is Credit Repair Services And Why Do People Need It?
In a nutshell credit repair services is when a consumer hires a company to have negative data removed from the consumer’s credit report. The legal term for these companies is “credit repair organizations” and they are regulated by federal law on what they can advertise and communicate to the public. These federal laws are necessary to protect consumers from deceptive marketing practices.
When a person hires one of these companies they will look at all of negative information on the consumer’s credit report and file dispute letters. By law the credit reporting agency must note that these negative files on the credit report are “in dispute” so it will not damage your credit score. While “in dispute” the creditors who made the claim has 30 days to provide documentation to proof their claim but most of these creditors fail to respond to the dispute. Once the 30 days has expired the negative credit details are removed from the report.
Cost for Using These Credit Repair Services
There are three (3) billing formats being used by these credit repair firms, each format has its own distinctive benefits and features.
- Subscription Model – The credit repair service provider will bill their clients every 30 days for the work being provided, these fees can vary but never draw the conclusion that higher fees mean better results.
- One Time/Flat Fee – The credit repair service provide will charge a one-time fee for their services.
- Pay Per Action/Deletion – The client only pays for each successful deletion. One of the benefits of this is the client is paying for results and since it is illegal for these credit repair service providers to ask for payment in advance it keeps things legally compliant. The only disadvantage is if an individual has a large number of negative items in their report.
Does Credit Repair Services Work?
It depends on who you ask, there are reports of these companies helping consumers get inaccurate information removed from the credit reports of unsuspecting consumers but the services being offered by these credit repair agencies are not proprietary, You could do this work yourself for free if you wanted to so you have to ask yourself whether it is worth your time to do it yourself or hire someone else.
Argument against the Use of Credit Repair Service Providers
The FTC and various consumer advocacy groups consider these credit repair services as scams and tell consumers to not use these services. The FTC is using two reasons to justify this approach:
- You Could Be Breaking The Law – It is illegal to file a dispute on a credit report when you know the debt is legitimate and you are just trying to “trick the system”. There are some credit repair service providers that get clients to sign up for a new SSN to create a new credit report which is completely illegal ad dishonest to say the least. So remember if the debt on the credit report is valid meaning the consumer is aware of it then they cannot in good conscience dispute it.
- You Can Do Your Own Credit Repair For Free – As mentioned earlier you can do your own credit repair, just get a free copy of your credit report and look it over for errors. When you have the errors identified you can write to the credit reporting agency and dispute the error yourself. By law the credit reporting agency will need to contact you with 30 days with proof of the debt or remove the delinquent account. So why would a person pay some company a considerable amount of money for something they could easily do on their own?
Food For Thought:
There is a large number of consumer complaints posted online from consumers who were ripped off by deceptive credit repair service providers. If you have credit problems and want to deal with them properly you should tackle them head-on and take care of it yourself. There are no short-cuts when it comes to having a good credit report but taking proactive steps now will help you rebuild your good name.