CREDIT REPAIR? JUST SAY "NO"!

Credit repair companies make phenomenal claims as to how they can help consumers “repair” their credit; however all they really do is dispute items on a report for the consumer. A credit repair company cannot do anything the consumer cannot do themselves for free. A credit repair company cannot even obtain a copy of a consumer’s credit report, as credit repair agencies are prohibited access to Experian, Trans Union and Equifax. Filing a dispute is the only way a credit repair company has to possibly affect a change on a consumer report since they have no access to the actual report.

Consumers can obtain free copies of their credit reports from all three bureaus at www.annualcreditreport.com. From here they will have instant access to the reports from the bureaus and, if errors are found, they can dispute them online at no cost. They are also provided a toll-free number where they can reach a live person who can answer questions and assist them with the process if need be. Other than credit rescoring this is the fastest method for updating incorrect information on a consumer’s file.

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Warning to Mortgage Professionals

Throughout the years we have seen audits conducted by the repositories that result in the termination of that broker or lender's access to credit reports. These audits are usually triggered by borrowers, who at the recommendation of a credit repair company have frivolously disputed items on their credit report that was provided to them by a mortgage broker. The repositories monitor patterns on disputes they receive and match them to recent inquiries on the consumer’s credit report.

All three repositories (Experian, Trans Union and Equifax) publish a monthly list of mortgage companies (and individuals) which are barred access to credit data through every credit reporting agency.

Credit Repair Warning Signs:

Charging Up-Front Fees

Many credit repair agencies violate federal law by charging up-front fees. These are often called “account set up” fees or “credit analysis” fees. Or they may require you to purchase a “manual” that explains how you can do your own “free” credit repair. It does not matter what they are called – they are illegal. Credit Repair Organizations Act – Public Law 90-321, 82 Stat. 164 “404” Prohibited practices. b) Payment in Advance –“No credit repair organization may charge or receive any money or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform for any consumer before such service is fully performed.” You can find the entire text at www.ftc.gov/os/statues/croa/croa.shtm.

Does not accept Credit Cards (or attempts to disguise PayPal as a merchant account)

This often means that the company is unable to get approval to process credit cards. To do this they have to have a physical inspection and a positive financial history. Companies that have questionable pasts or practices will often require you pay using a third party credit card processing company, check by phone, ACH/direct debit or other means which may provide little or no protection in the event of fraud. Some will demand post dated checks before providing any service. In essence, you are expected to trust them with your credit and banking information but they don’t trust you to pay them.

Web based, no physical locations or allows contact only by email

Check the history on any credit repair form before giving them any confidential information such as your credit data or credit card information. You can verify how long their website has been in existance by using any domain lookup tool such as www.domaintools.com. They may claim to have been in business for years but using these tools you may find their websites have only existed for a few months. A lot of the credit repair companies found on the Internet are actually only re-selling services provided by other companies. In this case it is almost impossible to actually know who is going to have access to all your personal information.

Important information for mortgage professionals!

You should always talk to your credit reporting agency before recommending to your clients that they dispute something on their credit report (either directly or through a credit repair company) for the following reasons:

• When you look at a tri-merge report you can not tell what is actually being reported by each bureau because the information has been merged. It could be the merge logic used to produce the report might be responsible for the error in which case no dispute would be necessary.
• When you borrower disputes a tradeline, that account is locked from any further actions until the dispute is resolved. It may have been possible, through rescoring; to correct the item in as little as 72 hours, but once the account is locked this is no longer a possibility.
• It is possible that removing an item (even a derogatory item) could cause a negative impact on the score or could even cause you to lose the score completely. This is especially true if the item was one of the minimum requirements used to produce the score. Unless you are absolutely certain of what you are dealing with it is always best to consult with your credit reporting agency to confirm what you are doing will have the desired results on the credit score.

Unforseen Credit Repair Dangers for Consumers

Not only are there monetary risks associated with credit repair but the actions of a credit repair company can also sometimes damage the credit score. Most credit repair agencies simply dispute every derogatory item on the credit report. Once disputed, if a creditor comes back and verifies the disputed information it can update the reporting date of that account and can drop the credit score. For example, let’s say you have a collection account with ABC Collection Agency and it has not reported since 2004. The item is disputed and the collection agency verifies it is still owing – this will bring the reporting date current and make it look like a recent collection and drop the score. When you dispute an account you are also giving them access to your current address which could result in new collection contacts and phone calls.

Credit Repair is a temporary fix in most cases

Most credit repair agencies require a monthly fee. For this fee they bombard the bureaus with dispute letters regarding certain accounts on a credit report. The bureaus receive so many disputes in a short period of time they often do not have the time or resources to adequately investigate the dispute in the required 30 day period so at that time the account is removed. However when the monthly payments stop, the letters stop and the creditor will then most likely continue to report the account. 90% of the time any information that was removed will come back.

A Solution to Credit Repair

You don’t need to pay anyone to “repair” your credit. It’s a simple process and it’s free. More