CREDIT REPAIR SERVICES
Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
CREDIT REPAIR SERVICES
Your credit score impacts everything in your financial life, from whether you can rent a home to the interest rate on your next car. If your credit score has taken a hit, you may be looking for a way to pull your score up fast. That's where credit repair companies come in. They promise to help you repair and increase your credit score.
According to the Federal Trade Commission, credit repair scams target folks who are in over their heads with loan and credit card payments and concerned about the state of their credit. Smooth-talking scammers push consumers to purchase their services by claiming they can remove negative information from the consumer's credit report, even if the negative information is accurate. How much they charge for the service depends on the company and the level of service chosen. Unwitting consumers can easily pay hundreds of dollars.
The promise to "repair" your credit score implies that there is something wrong with it. If you have a history of missing loan payments, being late on credit card payments, or otherwise failing to live up to your financial obligations, there is no quick fix. The negative remarks reported to credit reporting agencies are correct.
By law, a credit bureau is only required to remove negative information that is demonstrably wrong. Say you request a copy of your free annual credit report from all three major credit reporting agencies -- Experian, Equifax, and TransUnion. As you look one of the reports over, you realize that someone else's credit card information has been included. You dispute the mistake. The credit reporting bureau in question has a set number of days to either prove the information is correct or remove it from your report. No matter how low your credit score, you don't need a paid service to help you look for mistakes.
There are reputable debt counseling services around the country with counselors trained and certified to help you get to the root of your financial problems. These professionals will help you build a monthly budget that works and show you how to legally rebuild your credit score.
The Consumer Credit Protection Act contains numerous and varied provisions to curb consumer abuse, including requirements for debt collection, credit reporting, and credit repair. One such provision is found in 15 U.S.C. 1679, et seq., commonly referred to as the Credit Repair Organizations Act (CROA).
Yes, based on the consensus of case-law. See, e.g., Day v. Persels & Associates, LLC, Case No. 8:10-CV-2463-T-TGW (U.S. District Ct., M.D. Florida, Jan. 30, 2015); Ducharme v. Heath, Case No. C 10-02763 CRB (U.S. District Ct., N.D. California, Dec. 16, 2010). This is significant for firms providing a package of balance billing services, including credit repair, to patients and health plans.
If the agency cannot verify a disputed item, it must delete it. If your credit report contains erroneous information, the agency must correct it. If an item is incomplete, the agency must complete it. For example, if your file showed late payments, but failed to show you no longer are delinquent, the agency must show that your payments are now current. Or if your file listed an account that is not yours, the agency would have to delete it.
Be leery if you are tempted to contact a credit-repair company. The Federal Trade Commission and several attorneys general have sued credit-repair companies for falsely promising to remove bad information from credit reports. Here are tips to follow:
In Texas, credit service organizations are governed by Chapter 393 of the Finance Code and the secretary of state's administrative rules found in 1 Texas Administrative Code Chapter 74, as well as any other applicable state or federal law.
A person who provides, or represents that the person can or will provide, for the payment of valuable consideration any of the following services with respect to the extension of consumer credit by others:
Some CSOs offer payday loans as part of their services under Chapter 393, Finance Code. As CSOs, the services of the CSO are subject to Chapter 393 but apparently are not subject to the small-loan laws and regulations by the Consumer Credit Commissioner according to the Fifth Circuit Court of Appeals decision in Lovick v. Ritemoney Ltd, No. 03-20917 (5th Cir. July 14, 2004).
The secretary of state is a filing officer for CSO registrations and security and does not have authority to regulate the business practices of a CSO. The secretary of state cannot resolve disputes about CSO services, investigate the business practices of a CSO, or determine whether a consumer is entitled to a refund.
The recession of 2008-2010 left a wide path of financial destruction for a lot of people, and many have turned to credit repair companies to help get themselves back on track and increase their credit score. A lot of these companies aren't doing much more than what anyone could do to repair credit on their own, but many people feel intimidated or overwhelmed when it comes to cleaning up their finances. What these companies offer to do is pretty straightforward: work with your creditors to save you money on what you owe, while helping to increase your damaged credit score so you can borrow more money.
As nice as it sounds to have a company looking to save consumers money, keep in mind this isn't charity and, with the exception of some nonprofit credit counselors, most of the credit repair industry is less about helping others than it is about making money. That money, it turns out, is coming from the very consumers using their credit repair services. But just how much are people paying to have someone else help them clean up their credit?
The majority of online credit repair services are subscription-based, with fees for reputable companies falling into the range of about $50-100 per month. While a common promise in the industry is to have your credit fixed in as little as 6 months, the average length of time users stick with a subscription credit repair company is tougher to gauge. Different sources have different numbers, with many saying it's somewhere between 8-18 months, meaning that a legitimate online service over that time might cost between $480-1800, plus any setup fees that could add another $100 or more.
The flat fee system, by contrast, is where a credit counselor assesses your overall situation up front and sets a fixed price to complete all the work for you. Since these companies get paid the same whether it takes 5 months or 15 months, you won't face recurring bills for much longer than you planned.
A newer alternative to subscription services and flat fees is the pay-per-deletion model which operates just like it sounds. Instead of paying monthly fees no matter how long it takes or committing to a price that might be too high for the amount of work required, pay-per-click only charges you when the credit repair company successfully removes the negative information from your credit report. There will likely be some kind of setup fee that's $100 or more, but getting each item removed may only cost about $25 for standard credit dings or up to a couple hundred for bankruptcies, judgments, or tax liens.
Guided, do-it-yourself programs are an even newer alternative. A flat fee of $200-400 gets you access to online training courses that claim to teach you everything you need to know about repairing your credit on your own. Of course, this system requires a lot more effort on your part, so the results will only be as good as you make them.
Realistically, the credit repair companies probably aren't doing anything you couldn't do on your own; they just have a better idea of what they're doing. Exact tactics are often industry secrets, but basic services usually include: fixing mistakes on your credit report, sending good faith letters to lenders to establish your credibility in the repayment process, and assessing your credit report for overlooked opportunities to improve your score, such as making sure the credit bureaus can verify all of the negative information.
The more established credit repair companies may also have good relationships with lenders that allow them to negotiate better settlements or reduced and more flexible repayments, though not all lenders are willing to accommodate such changes and others just don't like working with credit repair companies. Some of the more expensive services might include access to dedicated paralegals or other credit specialists who can offer more personalized care. Most of the online companies also have premium services available, such as fraud monitoring and identity protection, for additional fees.
Keep in mind that fees for online credit repair can vary a great deal, depending on the company. Some of the most predatory companies may advertise very low rates but offer no real value in their services. For example, a common credit repair scam is to file disputes with the various credit reporting agencies for all of someone's delinquent accounts. Since the credit bureaus are required to remove those accounts from credit reports while their validity is being investigated, the customer's credit score improves temporarily. Unfortunately, once the accounts are deemed valid again after a couple of months, the consumer's credit score drops right back down where it was and they're out the "low fee" they gave the scammers. Credit repair is definitely an area where if it looks too good to be true, it probably is.
Unless your situation is exceptionally complicated or really urgent, you might find that repairing your credit on your own is easier than you might think. If, however, you feel like it's just too much to deal with by yourself, a credit repair company can help, but that help comes at a price. Be sure to fully research a company, including news articles, consumer complaints, and the Better Business Bureau, before committing hundreds of dollars to their services. It's not cheap, but a good credit repair company might be able to help if you find yourself running into brick walls with the credit reporting bureaus. If you have additional questions or would like to know more about your legal options, you should consult with a credit repair attorney. 041b061a72