Avoid Credit Repair Firms

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Avoid Credit Repair Firms

by William DiPaolo

The next time you think about paying a credit repair service take out a $20 bill from your wallet or purse and put it in an envelope addressed to your favorite charity. Then pull out another $20 bill and mail it to your second favorite charity. Grab 10 more envelopes, 10 more twenty dollar bills and ponder ten more sources for your new found altruism. Do mail the envelopes.

Using a credit repair service may well cost you more than $500 in up front fees. Instead, I’ll show you how to do exactly what they would do for you for free. And faster too. Consider the $240 you’ve given to charity a chance to put 50% of the money you would have given to the credit repair firm to much better use. 

Let’s take the mystery out of credit repair right now. All a credit repair company does for you is dispute information on your credit report. This means they will tell the credit bureaus when information is wrong. Within 45 to 90 days, if the information really is wrong, then it will be corrected. That’s it. Ironically, in the time it takes you find and pay for a credit repair company, you could have completed the task with the bureaus yourself. And for free.

Credit repair companies prey on ignorance, on consumers that don’t know how to do what I am going to plainly show you how to do. Because the process seems difficult, and involves highly personal credit reporting information, consumers blindly trust these firms and unfortunately pay whatever they ask. The fact that some credit repair firms hide behind a lawyer title makes the process all the more deceiving. The most insidious aspect of this somewhat shady business practice is that the company implies it will somehow give you a better credit score than you rightfully deserve. This is a lie – and, regrettably is the biggest reason people throw lots of money at these firms.

Again, all a credit repair company can actually do for you is dispute wrong information in your credit file. And who knows whether something is wrong in your credit file better than you? Even if you hired a credit repair firm, you would still have to tell them where the errors are. Let me say here that some firms will suggest you dispute every derogatory item on your credit report – and make the lender prove whether its true or not. Don’t fall for this. Even if the lender doesn’t respond within the time allowed, the information will only be changed in the short term. (which renders the costly improvement effort useless). You see, the next time the lender reports to the bureau, your accurate derogatory information will reappear.

The really good news about disputing wrong information is that all three credit bureaus (TransUnion, Equifax and Experian) now use a free online dispute process – which means you can review your credit file line by line, search your file for errors and dispute any you find without picking up the phone or even mailing a single letter. The whole process takes a few minutes and costs a big fat zero. And you can do it once every single year – which, by the way, isn’t a bad habit.

To check your credit report for errors simply go to www.annualcreditreport.com where you can order a credit report for free once a year. Make sure you review all three bureaus since each is an independent company and any one of the three may be reporting your payment history in error. While reviewing the report, each bureau gives you the option to dispute information. Each uses a slightly different dispute method, but all are easy nonetheless.

When reviewing tradelines look for any accounts that are not yours. Keep in mind, some may report using creditor names with which you aren’t familiar, but you may well be the account holder. Look also at the inquiries – has a company pulled your credit without your permission. If so, you can get the inquiry removed. Look for balance on credit cards reporting incorrectly as well as high credit limits. Creditors are notorious for misreporting credit limits – and if they are reporting a limit that’s too low it may hurt your credit score. Ditto for balances reported erroneously high.

In the end look for anything inaccurate and use the online process to let the bureaus know about it. The bureaus will contact the creditor for you and verify if what you are saying is correct. At no cost to you, the bureau will update your file to reflect the accurate information. And, in addition to saving a lot of money, you’ll learn a lot about your credit file – which is a rather nice side benefit.

There is more, however. Technically competent mortgage brokers can make very dramatic and legitimate increases in your credit score in just a few days. I’ll blog about this later.

2 Responses to “Avoid Credit Repair Firms”

May 01, 2008 at 11:38 pm, Ryan Garrison said:

I agree with some of what you wrote here. There are a lot of credit repair firms that charge a lot of money for very little service. The ones I refer people to run about $50 per month. Neither I nor you would ever resort to hiring someone to dispute things on our bureaus, but as someone who deals with people that have credit scores in the 300s, 400s, and 500s all day long, a lot of these people need the extra help. Someone with really good credit, that has one item erroneously show show up on their credit bureau will be much more likely to get that information corrected than someone that has 40 derogatory items on their credit. I know that much of the information that is unjustly removed from the credit bureaus will return…but a lot of the time, not all of it returns. The key is to pay a fee to get your credit re-scored while the negative items are not on your bureau and try to get that auto loan or home loan while the score is artificially higher. One reason a lot of the info can stay off of the bureau is that old negative items often stop reporting eventually, and may not even be in business anymore…guess what happens when they do not respond to the disputed item or do not re-report the negative item: One less negative item on someones credit. People with generally good credit do not need those services, but people with chronic derogotory credit do benefit from them. A lot of times it is just laziness that stops them from trying to dispute everything themselves. A lot of times, being lazy about paying their bills is the reason they need to clean up their credit too. Just my thoughts. Keep up the good work with your posts. Ryan

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