We’ve all heard of the crooked car Mechanic haven’t we? You know – the guy that says you’ve got a serious engine problem after bringing in your sweet ride for a routine oil change. We’ve all had our run-ins with scammers. So what about “credit repair agencies” – Scam or legitimate? This week we are putting the “Credit Repair” industry under the microscope to get the whole story. Let’s begin!
#1. HOW IT WORKS
There are always 2 sides of a coin, so we will take a look at how Credit Bureaus work in contrast to Credit Repair. After all, Credit Repair wouldn’t exist if there were no Credit Bureaus. Makes sense huh?
Essentially Credit Bureaus have history on millions of consumers(known as a credit report). You can read more on that in another post –They receive this history from Lenders and Creditors, that by law report all activity on a consumer. The Credit Bureaus then use a method to determine your Credit Score. Alright, who’s to say the information being reported is correct or fair? Even a few wrong items can mean a significantly lower FICO Score.
Credit Repair agencies have a process in which they review the consumers full credit report, and then “challenge” or “dispute” information found . Here’s the kicker – if items are what we call “erroneous” (fancy word for error) the Credit Bureaus are NOT obligated to remove or correct the information. If information on a consumers credit report is “disputed” by either the consumer or Credit Repair agency, then the Credit Bureau is required by law, to open an investigation. If they find the information was reported wrong in any way, they must remove it. Because Uncle Sam said so.
“So my credit score may have been suffering for years without me knowing it” you say? Yes, and your FICO Score is increasingly becoming the measuring stick in our evolving world – to name a few: renting or buying a home, car financing, and in some cases even your job can be determined by information found on your credit report. Not to mention, you can save serious cash on lower interest rates by having a better FICO Score.
#2. CAN’T I DO IT MYSELF?!
This is an excellent question – Alright let’s use the greasy Mechanic as an example. You can bring your car into the shop and tell them you need an oil change. But some would argue “an oil change is a piece of cake! Why in the world would you pay for that”. Those with the know-how would happily save the money – but for those that have no idea what their doing would be happy to flip the bill to have it done by our friend the Mechanic.
In hindsight, this is no different than flipping the bill for a Credit Repair agency to roll up their sleeves for you. Sure you can buy the oil, the filter, the wrenches, the drain pan… and then watch a “how-to” video on Youtube. But Credit Repair agencies have the tools, legal knowledge and resources to do the heavy lifting for you. In fact, the majority that decide to do their own credit repair find in the end that paying someone else to do it for them far out-ways the time and commitment of doing it solo. Where do you see the value?
#3. IDENTIFYING A SCAM. CRAIGSLIST, ETC.
I left this one for last because I know you still have that little voice in the back of your head that says “but if it’s a scam then what I’ve read thus far is irrelevant”.
When someone screams “scam!” it’s only fair to examine the validity of such a claim. The Credit Repair industry has definitely seen it’s share of scammers from within. There’s the classic Craigslist scammer that promises to repair your credit for – let’s say a $1,000 bucks <<—–that’s crazy. Then there are the overwhelming amount of websites that promise the moon, take your money and you never hear from again. All industries have jerks that spoil it for everyone else – athletes on enhancements, Ponzi Schemes, work from home ads, and weight loss. The list goes on and on.
In light of this, the majority of scrutiny on credit repair comes from outside sources – namely the Credit Bureaus and government agencies. As we learned in #1: each time a Credit Repair agency does the work on a consumers behalf, they make the credit bureaus work and it costs them money and resources to “investigate” the data they have on the consumers credit profile. There’s nothing corrupt or scam’ish about this process. The fact is, Credit Bureaus must undergo the exact same work if a consumer themselves where to “dispute” the accuracy of their credit profile. As for Government agencies, well scammers rip people off, and as a result the government tightens the belt in an effort to protect consumers. If you want your credit repaired it’s important to find a legitimate company through proper channels. A few include:
- Check their website (they should have one)
- Ask for business registration (filed with the State)
- Don’t pay upfront (by law, credit repair agencies must “bill-in arrears”)
- Always sign a contract (get a copy)
Scammers play off emotions and desperation of the victim. So to avoid scams use your head and don’t act prematurely. Always get the whole story.
Stay thirsty my Friends.