Today, businesses and consumers around the world fall victim to the limitations of a poor credit score. From cars and houses to new jobs and business opportunities, a poor credit score can stop you dead in your tracks.
This harsh reality often makes promises of “guaranteed” credit repair or “clean” credit reports appear as beacons of hope. And as we’ll discuss later, even business credit repair is getting in the act.
Because it’s so vital to financial freedom, credit repair, or the act of removing false, inaccurate or otherwise questionable information from your credit report is a big business.
The increasing importance of our personal and business credit scores has resulted in an abundance of credit repair companies that offer to fix your credit in exchange for a fee. Generally speaking, these companies will offer a three step service:
They will request that you send them copies of your credit report from the major credit reporting agencies including Experian, TransUnion and Equifax.
Upon receiving the reports, they will review them and identify what items should be disputed.
After you agree upon the disputable items, the company will contact the credit reporting agencies and challenge any questionable or inaccurate information.
Why Do People Use Credit Repair Services
Though consumers have numerous reasons to turn to credit repair companies, often times, they feel one or more of the following statements are true:
“The credit repair companies have secret methods or information that can help improve my credit.”
While these companies may be well practiced in the dispute process, there are no legal methods available to them that are not available to you.
You have the right to view your credit report once a year without charge. You also have the right to send in dispute letters to the credit reporting agencies.
If the information you’re disputing is incomplete, incorrect or unverifiable, the Fair Credit Reporting Act (FCRA) requires credit reporting agencies to remove that information within 30 days.
“I’ve sent dispute letters in, but I was unable to fix the errors. I have no other option.”
If you took the time to review your credit report and send out dispute letters, this situation can be very frustrating. However, there is hope.
Consumers in this position should file a complaint with the Consumer Financial Protection Bureau. This organization will contact the reporting agencies on behalf of the consumer. This service is available for free, but consumer should only attempt this after they’ve attempted to file a dispute on their own.
If they fail to resolve the issue, consumers can also work with a consumer law attorney to remove the error and collect damages if applicable.
“The credit repair process is too overwhelming and/or time consuming.”
It’s not always easy to argue that point. Credit repair can be both overwhelming and time consuming. There is nothing wrong with seeking outside help.
If you decide that a credit repair company or service is your best option, it’s important that you educate yourself. Understanding your rights as a consumer can help you identify credit repair scams.
Identifying Credit Repair Scams
Learning the credit repair basics, including how to spot credit repair scams, can save you a lot of grief in the long run.
Fortunately, the Federal Trace Commission (FTC) has compiled a list of warning signs that can tip you off to a credit repair scam. They are as follows:
- The company fails to inform you of your right to fix your credit on your own, for free.
- They request payment before services have been rendered.
- The company asks or advises you not to contact credit reporting companies directly.
- They propose or ask you to engage in illegal tactics such as file segregation (using an Employment Verification Number instead of your Social Security Number when applying for credit) or identify theft (using false information to apply for credit or claiming an accurate debt is fraudulent or wrong).
Business Credit Repair or Business Credit Building Scams
The tips above are great for general consumer credit repair, but what if you’re trying to build or establish business credit? In addition to the tips above, current or potential business owner trying to improve your credit should avoid any company that:
- Promises to establish or improve your credit in less than three months.
- References contact or network relationships that will “help” improve your credit. This isn’t a social club, it’s doesn’t matter who they know.
- Is not transparent about funding your needs.
- Does not have a website or owns one that does not include reviews, ratings, feedback, testimonials or a client log in.
Before You Sign with a Credit Repair Service
The tips above can help you as you review possible credit repair companies, but they aren’t your last defense. Thanks to the Credit Repair Organizations Act, consumers have legal protection against fraudulent companies.
As part of this act, all credit repair companies must supply the consumer with a written contract that includes:
- Payment terms and cost for all services to be rendered.
- Detailed description of services to be rendered (including any guarantees).
- Anticipated date of completion.
This article was originally written on October 7, 2015 and updated on November 12, 2018.