Credit Repair: The Dos, Don’ts, and Ifs

Job losses. Pandemics. Plain old forgetfulness. There are plenty of reasons why people get in credit trouble. According to a recent study by Experian, one of the three major credit reporting bureaus, 16% of Americans have a poor FICO credit score below 579. And only 1.2% of us have a perfect credit score of 850.  Your credit rating determines how willing banks and other lending companies will be to extend you credit and at how favorable an interest rate. If you take out a mortgage or car loan, or even carry several credit cards, your credit score can have a significant impact on your cost of living from month to month and over a lifetime. If your score is less than ideal, it may be time to undertake a credit repair program.

DIY or Call in the Pros?
Credit repair can be a slow and tedious process. Many consumers—particularly those who have been the victim of identity theft—don’t have the time or patience to do it on their own. Professional credit repair companies abound and each offers its own menu of services and corresponding price structure. But the credit repair industry is rife with scams that add insult to injury for people who are already under credit stress. There are reputable credit repair companies out there, however. Here are a few tips to help sidestep the scammers and find a company that can get the job done fair and square.
 
Recognize the Full-Stop Signals

• The first thing you should know about credit repair is that no company can remove legitimate negative remarks on your credit report. What you’ve truly done is done. Any credit repair company that promises you, for example, that it can remove a bankruptcy from your report, is blowing smoke you know where.

 

• If a credit repair company tells you not to contact credit reporting bureaus directly, it’s likely they’re hiding something.

 

• If a credit repair company encourages you to dispute accurate items on your credit report, it’s asking you to commit fraud. Criminal charges are the last thing you need when you’re battling poor credit.

 

• If a company promises that they can create a “new credit identity” for you, steer clear. Some may even provide you with a substitute number you can use to apply for new credit. It may look like a social security or EIN number, but it’s fake. Using it is against the law. What’s more, the company may be involved in stealing social security numbers to engage in identity theft. You could be criminally charged as an accessory to identity theft under those circumstances. That’s a federal crime, punishable by up to 15 years in prison. Yikes!

  
Hallmarks of Legitimate Credit Repair Companies

• Credit repair companies on the up and up want you to know your legal rights. They’ll provide you a copy of your Consumer Credit File Rights before they ask you to sign a contract. They may even post the document on their websites. That’s a good sign.

 

• While many credit repair companies charge an initial start-work fee, which covers the cost of reviewing your credit report and other documents and creating a repair plan, legitimate firms do not bill you for ongoing services in advance.

 

• Look for a company that makes its plans and pricing information crystal clear. Authentic companies also offer strong customer support. If you don’t understand the terms of any service a credit repair firm is offering, there should be a live human available to thoroughly explain what you’re signing up for.

 

• The best credit repair companies provide you with detailed progress reports each month that outline the steps they’ve taken towards repairing your credit. They’ll also provide your most recent credit report so you can see how well the process is working.

 

• Reputable companies permit you to cancel your contract at any time with no financial penalty. You should have that right if you’re unhappy with the service or results you’re getting.

 
Rely on Free, Authoritative Resources
 
Credit repair is complicated. Regardless of whether you decide to go it alone or hire a company to help, make sure you’re fully informed. Here are a few online government resources that can help you understand your credit position, develop a plan to improve it, and find an above-board company to support you:
 
Download copies of your credit report from the three major credit bureaus:
https://www.consumer.ftc.gov/articles/0155-free-credit-reports
 
Read about the laws governing how credit repair can operate:
https://uscode.house.gov/view.xhtml?req=granuleid%3AUSC-prelim-title15-chapter41-subchapterII-A&num=0&edition=prelim
 
Learn how your credit score is calculated:
https://www.federalreserve.gov/creditreports/pdf/credit_reports_scores_2.pdf
 
At Chesapeake Legal Counsel, we strive to keep our clients well-informed about their legal rights—and make sure they’re always operating on the right side of the law.
 
Author Bio:
Susan Doktor is a journalist, business strategist, and principal at Branddoktor. She writes on a wide range of subjects including finance, technology, and government affairs. Follow her on Twitter @branddoktor.