Credit Repair Companies: Use With Caution

Dec 21, 2010

When your credit is in the basement, those TV and e-mail ads that promise to make your troubles go away can be pretty tempting.

But the truth is, if you really do have a bad credit history, they cannot make it go away. And the ones who make those big promises are the ones you should avoid like a flu bug. These are the companies that propose to use illegal means to clear your report. And instead of helping you, they could land you in legal hot water – all while taking their heft fee, of course.

Some credit repair companies are on the up and up, but they can only do so much, and the things they can do are all things you could do on your own.

All they can do is correct errors and oversights.

For instance, if there is information on your credit report that is false, they can help you file dispute letters. This could be an account that you’ve paid in full but it is still showing as unpaid. It could be an account that has gotten on your credit report via a data entry error. It could be a data entry error that shows you owing 10 times your true balance.

If you have negative information that is old, but has not been removed from your report, a credit repair company can help you prove that the time limits have passed and get the credit bureau to remove the negative information.

If you’ve had a bankruptcy that should have removed charged-off accounts from your credit report, they can help you get that done.

The Credit Repair Organizations Act has set forth regulations for these companies, and so that you will be aware of those regulations, they are required to give you a copy of the “Consumer Credit File Rights Under State and Federal Law” before you do business with them.

One of those rules is that they may not charge you any fees until they have completed services performed under a written contract with you. And, since you may have made the decision under stress, they are not allowed to perform any services until 3 days after the contract is signed. This gives you time to cancel without payment.

Your contract must set forth exactly what they will do for you, plus the total cost and payment terms. The contract must also include a time frame, and any guarantees must be in writing. In addition, they must reveal their company name, business address, and phone number. If all they have is an Internet address – stay away from them.

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