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If you dream about a score above 750, but you are stuck in the mediocrity of the 600s or even worse, you are trapped with gloomy credit perspective and a score in the 500s, a credit repair company, could seem like your golden ticket. These businesses rely heavily on marketing, and although there are some legal steps they can undertake and provide real help, there is also a concerning number of scammers waiting to take advantage of the misinformed.
The favorite victims of the scammers are clients with low financial education, who already made enough money mistakes to be desperate and are looking for a quick fix, hoping for the miracle pill. A good comparison is with companies that offer slimming supplements, promising you to lose 10 pounds in 10 days.
When do you need a credit repair company?
The first legit question is “Do you really need the services of these companies?” The system is designed in such a way that you can represent yourself. Technically, you don’t need a lawyer or any kind of third-party agent to act on your behalf. However, if you don’t feel comfortable reaching out to the credit report agencies (Equifax, Experian or Transunion) and prefer somebody else deal with this while you focus on your job, it is an option.
A credit repair company should first and foremost act as a financial advisor and explain to you the possible mistakes on your credit report. A copy of this report can be obtained for free, once a year from each of the three agencies. First, go over the report yourself and mark any activity that you suspect is not right. Common errors that appear on credit reports include:
- spelling mistakes or other personal information (date/place of birth);
- duplicates of the same debt;
- charges for purchases you did not make;
- identity thefts;
- outdated information, closed accounts;
- remedied delinquencies;
- ex-spouse data.
Each of these problems requires your immediate attention. The problem can be fixed by a dispute letter addressed to the agency issuing the report. Also, be sure to check if the same error appears on all three reports. The role of the credit repair company is to create and send this letter on your behalf and ask you to provide relevant documentation to sustain your claims.
You could do all these steps yourself, but a reputable company can help with their experience by crafting letters that get attention and including all the relevant documents to solve the case from the first attempt. However, if you feel confident about business communication and have proper documentation, you can try explaining the situation yourself.
How to identify a scam from a genuine company?
Once you have decided that you don’t need the additional hassle and would prefer to pay someone to do the dirty work for you, it’s time to find a company you can trust. The plague of this activity sector is that it is full of sharks and scammers. First, all are trying to take advantage of those who are already in debt and struggling. Secondly, they hunt those a poor understanding of the system. The obvious warning signs that should help you avoid scams include:
- promises to raise your credit score fast, or to offer to increase it by a specific number of points;
- not providing you with a contract clearly referring to legal boundaries and ways of action;
- failing to inform you about your possibility of disputing credit mistakes without their help;
- failing to provide you with a clear schedule of the services that will be performed and estimated dates of solving the problem (no longer than one year);
- asking for money before doing any actual work;
- promising you a clean slate by operating modifications of your social security number or other means of identification;
- vows to remove information hurting your score although it is true.
How do scammers operate?
Any of the examples provided above should make you avoid any collaboration with companies offering such services and even file a complaint addressed to the Attorney General’s Office.
Furthermore, avoid online credit repair businesses that provide you the opportunity to check your credit through their web apps. Some even state that you can make on the fly corrections. The only way to set up straight the situation is by contacting the rating agencies. These are either ways of collecting your personal data for marketing purposes, in the most benign situation or cleverly designed ways to steal your identity and get you into more trouble.
Check their online reputation and ask for a copy of the contract you will be invited to sign. Tell the agency that you want to discuss it with a lawyer before getting involved. If they refuse and don’t want to be transparent, just stop considering doing business with that company.
What are some realistic expectations?
Removing a few duplicates or clearing the accounts that belong to the ex-spouse in 3-6 months is reasonable to ask a credit repair agency. Since the payment for such services is monthly, ask straight from the beginning for a time estimate. Include that in the contract, just in case the agency does not fulfill its part of the deal. If you expect them to clear your traces and act like an eraser, you should take more responsibility.
How much does it cost? Could you do it for free?
Most credit repair offices charge anything between $60-100, offering different levels of service and additional options like SMS alerts, monthly statements or reports or even going after the original creditors.
As previously stated, you don’t need this service, as you can do everything yourself for free. It is a great option for those who don’t have the time or skills to pursue a notable amount of paperwork. Only get to a credit repair company for those items that you were not able to remove yourself.
Remember, the process of removing an erroneous statement from your report can be long and frustrating. Don’t expect overnight results and work towards improving your credit score by making better choices and living on a budget.