At least once a day I hear or read a television, radio, newspaper or internet ad claiming “Credit problems? No problem!” or “Let us erase your bad credit — 100% guaranteed.” The ads promise to help consumers with poor credit histories clean up their credit reports so the consumer can get loans, mortgages, insurance, etc. Never mentioned in the ads are the thousands of dollars often charged for such services. While many of the credit repair companies can in fact lower your monthly payments and negotiate down a debt, avoid the following at all costs:
CREDIT REPAIR COMPANIES TO AVOID
1) companies that want you to pay for credit repair services before they provide any services. The Federal Credit Repair Organizations Act prohibits credit repair companies from requiring you to pay until they have completed the services they have promised;
2) companies that do not tell you your legal rights and what you can do for yourself for free;
3) companies that recommend that you not contact a credit reporting company directly;
4) companies that suggest that you try to invent a “new” credit identity — and then, a new credit report — by applying for an Employer Identification Number to use instead of your Social Security number.
5) companies that advise you to dispute all information in your credit report or take any action that seems illegal. If you follow illegal advice and commit fraud, you may be subject to prosecution.
DISPUTING A DEBT
The law allows you to dispute an inaccurate credit report free of charge. The "big three" nationwide credit reporting services are "Equifax," "TransUnion," and "Experian." Once any of these agencies receive a consumer dispute they are required to take the disputed debt off of the report until an investigation is conducted. A common tactic used by illegitimate credit repair companies is to dispute every negative mark on a credit report, show the consumer a clean credit report (clean because the reporting agency is conducting an investigation), collect the fee from the consumer for the temporarily "cleaned up" report and disappear once the fee is collected.
On the other hand, credit repair companies can be helpful in negotiating lower monthly payments and lump sum settlement agreements with creditors. Many companies have long established relationships with creditors and payment reduction agreements creditors are comfortable with signing.
One last thing, you can order a free annual credit report at annualcreditreport.com, or call 1-877-322-8228.