Posted on Monday, 25th February 2008 by R.J.
Having trouble getting approved for a new house or car loan? You’re not the only one. And now, the Better Business Bureau is warning that some companies are using the credit crunch to take advantage of consumers who want to clean up their credit.
The BBB reports that complaints against credit repair companies have risen for three straight years — increasing more than 37% since 2004. How can you avoid being scammed by these guys?
Know Your Rights:
If you contact a credit repair agency or respond to a credit repair offer, by law you must be provided with a copy of your consumer rights. This is a one-page document explaining your rights if you decide to dispute inaccurate information with a credit company.
Don’t Be Fooled:
Notice that I said “dispute inaccurate information.” A lot of these credit repair companies claim they will erase any credit blemishes. The fact is, nobody can remove accurate and timely information from your credit report. Not even the magical credit repair companies.
These credit repair companies are in it to make money. Most will charge a fee up front — sometimes as much as $1500. What, exactly, will they do for your hard-earned money? Not much. Besides the fact that they are not able to remove accurate information from your credit report, some companies will claim to get you new social security numbers or piggyback on someone else’s credit report to boost your credit score.
First, let me explain something. Having bad credit is NOT a valid reason for getting a new social security number. If it were, we’d all be applying for new Social Security numbers every month. It is a federal crime to misrepresent your Social Security Number or to obtain an Employer Identification Number from the Internal Revenue Service under false pretenses. Sound like fun? It isn’t. Don’t let these companies trick you into breaking federal law by misrepresenting the services they are providing.
Secondly, as I’ve mentioned previously, piggybacking is a thing of the past because of these very companies. Fair Isaac, the people responsible for credit scores, have disallowed people from “renting” out their credit scores to help boost someone else’s otherwise bad credit. Creditors don’t want to lend to someone who cannot pay their own bills and only have a decent score because they are “borrowing” someone else’s credit. If a repair company tries to sell you on this, don’t fall for it. It no longer works.
Do Your Own Work:
So, what, if any, legitimate service do these guys provide? The fact is the only thing they can legally do is stuff you can already do yourself. They will examine your credit report for any inaccuracies (debts that you don’t owe) and try to get them removed from your credit report.
What exactly qualifies for removal? Some people, wrongly, think they can call the credit bureaus and say “This creditor I owe $3000 to has his name misspelled on my credit report, therefore its inaccurate and I don’t owe this!”
I’m sorry. But that’s wrong. The only way inaccuracies are going to be removed are if: A) the debt was reported to the wrong social security number (rare) or B) the creditor made a mistake and you don’t owe the debt at all (somewhat less rare).
In either case all it takes is a call to the credit bureaus and filing a dispute form to get these removed from your credit report. It’s easy -and- you didn’t pay $1500 for it.
The bottom line is that anything legal these credit repair companies claim to do you can do yourself for free. And any illegal things they will do, you do not want to be involved in.
One final thing to note is that under the Fair Credit Reporting Act, you are entitled to a free copy of your credit report if you’ve been denied credit within the last 30 days. This means its absolutely free to review your credit report yourself, however, if the debts you owe are legitimate; nothing can be done.
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Posted in Credit Scores | Comments (1)
February 27th, 2008 at 6:06 pm
Great post, R.J.
Most of those credit repair agencies are far more trouble than they’re worth!