Credit repair businesses under fire

Credit repair businesses

An old Social Security card with the “not for identification” message (Photo credit: Wikipedia)

Credit Repair Businesses are controlled by Feds

The Consumer Financial Protection Agency is now studying Credit Repair Organizations and may come up with new regulations at some future point.  Until that point is reached this is the current state of the law.

The Federal Credit Repair Organizations Act (CROA) is the law that governs businesses that exist to provide credit repair to consumers.  There are many legitimate companies around that do a fine job of helping newcomers navigate the system and improve their credit score.  There are also many pretenders.  The nails salon in your local mall has more licensing requirements than a credit repair company does.  All a scammer has to do in most states is put up a sign and claim to be an expert.  There’s not a whole lot anyone can do about it unless the scammer runs afoul of the law.

Recently several California credit repair businesses settled a lawsuit.  The Court said that credit repair businesses cannot charge fees upfront even if these fees are called consultation or set up fees.  Credit repair businesses are not to charge customers until they can document actual improvement to a client’s credit report or score.  The practice of monthly fees is forbidden.

Credit repair businesses often make a practice of flooding the credit reporting organizations with dispute letters.  These letters are sent regardless of the validity of the charge being disputed.  Consumers should be aware that they cannot get a mortgage with outstanding disputes.

Credit Repair Businesses are Scammers if…

  • They ask you to pay for their service up front.  This is forbidden by CROA
  • They claim they have a secret way…they don’t
  • They claim they have an inside connections at the bureaus…they don’t
  • They promise instant results…no such thing
  • They claim they have a special 800 number to the credit reporting agencies…they don’t
  • They promise a brand new line of credit if you get a new social security number or Federal Employer Identification Number.  This is illegal.  Be careful or you may wind up in jail with them.
  • Brag about inconsequential corrections such as corrections to your former address or job.

 Good Credit Repair Businesses will…

Credit Repair businesses that are legitimate will have a physical presence.  They will have a navigable well designed website.  They will be easy to contact.  You will talk to the same person at least most of the time.  They will tell you that they can’t do anything for you that you can’t do yourself.  What they can do for you is cut the learning curve.  They can give you the benefit of their knowledge and experience.  Much about the credit scoring system is counter-intuitive.  It’s easy to make a mistake when you try to correct mistakes at credit bureaus.  It is hard to enhance your credit score alone.  You can’t possibly know all there is to know about it.  Many people get frustrated and discouraged while doing it alone.

Credit Repair Businesses can Cause you Harm with Bad Tactics

Marginal credit repair businesses like to show their customers a lot of work they can charge for.  They flood the credit bureaus with frivolous complaints to impress their clients.  This can cause a small rise in the score just because negatives under review sometimes aren’t counted until the review is complete.  Just because the creditor misses the 30 day deadline for his response doesn’t mean it can’t be re-inserted later.  Also flooding the bureaus with disputes can result in them labeling you a filer of frivolous disputes which they are legally allowed to ignore.  The bureaus themselves get to decide which disputes are frivolous.  The form letters bad credit repair businesses use are obvious to computers.

 Don’t leave your common sense behind when choosing credit repair businesses.
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After practicing law for 37 years Edward F. St. Onge, Sr. now devotes all his time to helping consumers achieve a high credit score with amazing speed. Learn the counter-intuitive secrets to credit scoring through his down to earth instructions backed by extensive knowledge of the laws and trends. All of the latest tricks and techniques that they don't want you to know now at your disposal. At last a level playing field for the consumer!

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