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Credit Repair Companies: The Unforseen Danger

Credit repair companies have been around since the advent of the credit card. But it’s only been with the recent economic downturn that credit repair agencies have experienced a true growth. So what do these agencies do? And is there any benefit in using them?

In reality credit repair agencies cannot do anything you cannot do legally. You could go through the entire process of repairing your own credit without outside help. They have no special powers or influence. What they do in effect is give you peace of mind, allowing you to be hands off your credit issues to a team of trained professionals with hopefully years of experience with credit resolutions.  So basically, it is one of two options. Either you can go it alone, learning as much as you can about credit resolutions and trying it yourself or you can hire out a company to do it for you. Leaving it in the hands of a professional agency seems like a good idea; however there are also many companies who may not have your best interests at heart.

Some, though not all, credit repair companies use illegal and fraudulent tactics. These are the companies that usually promise a fast and easy solution to your credit problem. In this day and age, speed and ease of use are two things that people seek after the most in everyday life. However there is no legal or honest way to fix your credit quickly and without serious effort. One fraudulent way some supposed credit repair companies promise to erase your debt is by issuing you a new social security number. The claim is that is it a quick, painless, and legal way to set your credit rating back to zero within a few weeks’ time. Well like your mother always told you, if it sounds too good to be true it probably is. In reality most of these companies take your money, and give you fake identification. In actuality concrete proof that there have been multiple instances of identity theft against you have to be proven before the Social Security Administration will even consider issuing you a new social security number.  And even if you are issued with a new social security number to erase your credit history you are guilty of trying to fraud the US government, and may be prosecuted. Another tactic is that they may flood credit agencies with requests to dispute the items listed in your credit history. Credit agencies are required by law to then remove these items from your record while they investigate the dispute. The credit repair company then requests a credit history report while the agencies are investigating the claims and it will appear clean. They take your money, you take them at their word and within a month all of your disputed charges will reappear. Oftentimes these companies will discourage you from contacting your creditors, not explain to you your legal rights, and ask for payment before they conduction any service at all.

First of all, know your rights. In 1996 Congress passed the Credit Repair Organizations Act or CROA to protect consumers from unfair and illegal practices by credit repair companies. By law credit repair companies have to give you a copy of "Consumer Credit File Rights Under State and Federal Law” before you sign a contract. Under CROA a credit repair company may not make false claims about the services they provide, perform any services before you have signed a contract and a three-day waiting period has passed (during which you can cancel their services at any time without charge), and charge you anything until they have completed the service. The actual contract must contain your rights and obligations in full as well as theirs, including any guarantees that they offer, a detailed description of the services that they provide, the total cost of their services, and how long the process will actually take. If the credit repair agency you have contacted doesn’t do any other these things get out immediately and go to another service. Don’t risk you money, and more importantly your financial future, to someone you can’t trust. And if it is too late and you have already been taken advantage of by an unscrupulous credit repair agency, contact the Federal Trade Commission by going to www.ftc.gov or by calling 1-877-FTC-HELP.

Now this is not meant to shy you away from using a credit repair agency. For every one that uses illegal and unethical means and dozen more will provide legitimate assistance. But the most important thing that you can do is educate yourself first and foremost so that you can have a positive experience.

 

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