How to Avoid Credit Repair Scams
Credit repair is the process of fixing or rebuilding your credit profile once it’s been damaged. Whether it was caused by identity theft, poor money management, or circumstances beyond your control.
How to spot potential credit repair scams
While the process itself is legal ( see credit repair organization act or CROA ) and can be very effective, there are scam artists out there. We’re going to show how to avoid them.
Now, let me elaborate a little bit on some of these issues, because they can be confusing.
credit repair guarantees: A credit repair company cannot guarantee results e.g. guarantee to remove negative items or improve your score. However, they can offer a customer service guarantee if they choose to. My Credit Group offers a satisfaction guarantee
Taking money upfront: credit repair is done on a month-to-month basis so if a credit repair company charges you after they do “this month’s work” that is legal. If you call one and one of the first things they do is ask for sign-up fee, or pay for the entire program in one lump payment, those are both illegal.
Fixing your own credit: Technically, you don’t need a credit repair agency to do this. However, a good company will save you some time and headaches, and they will likely know the ins and outs of the system better than the average consumer.
Are credit repair companies legal?
The short answer is yes, if they follow the rules above and abide by state and federal laws, credit repair companies are legal, and some offer a great benefit to consumers who don’t want to do it on their own.
Is paying someone to fix your credit worth it?
This subject isn’t as black and white as just how to avoid credit repair scams. In my opinion, you can find a perfectly legitimate credit repair service and get very poor results. Again, IMO most companies leave out some very vital steps in their process to make the process easier on them. So here is my opinion on that subject:
Your initial consultation is key!
I can’t express enough how important this step is. Let me give you some examples of why it’s so important.
Are you trying to buy a home?
Well, some lenders will not approve you for a loan if you have items in dispute. If you hire a company that doesn’t ask you these things and puts a bunch of disputes on your credit, there go your chances of a home loan until the disputes are removed.
The state you live in matters:
Why does this matter? Because each state has statutes on debts. Meaning the amount of time a collector has to take legal action against you. If you’re getting close to your state’s statute and dispute an item, depending on the circumstances, disputing collections it may prompt the collector to run to court and try and get a judgment before it expires.
Do you have a bad credit problem or a utilization problem?
We turn away about 20% of the people who call us because they don’t really have bad credit. A lot of times people don’t have any good credit, or their current credit utilization is out of proportion. A simple free consultation will spot instances like this, and some good advice is all they need.
There are dozens of reasons why the initial credit repair consultation is so important. You, your circumstances, your goals, and your financial resources are all unique to you, and the plan to rebuild your credit must be as well. If they’re not, and you’re in what I call a “dispute mill” there’s a chance you’re going to be disappointed.
For me, knowing what I know now if a company just asks you to upload your credit reports and tells you to “check all the items you wish to dispute” I’d walk away right there.
Do they offer any debt relief services?
The truth of the matter is a lot of times disputing, even removing inaccurate negative items is only going to get you so far. What about debts that are legitimate and in collections? What happens to those when disputes fall short?
There is a solution most of the time. A good credit repair company will negotiate with those collectors. Many times, we can get greatly reduced payment arrangements, and can sometimes negotiate what’s called a pay-for-deletion.
Other things to look for (or ignore) in a legitimate credit repair company.
Better Business Bureau Complaints:
this is another touchy subject because I think the BBB really falls short here. The BBB has different standards from state to state (I think even county to county). In other words In Texas where we are headquartered, they don’t allow credit repair organizations to join the BBB, but states like Florida do. I think it puts us at an unfair advantage over people who care about the BBBs opinions.
What all BBBs do nationwide though is log the complaints against a company whether they are members or not. So, if you see a company that has 100,200, 300 complaints, that would be another red flag for me.
For the record, My Credit Group has ZERO complaints with the better business bureau.
Are Credit Repair Companies Legitimate?
Some are, some are not. Some provide a great service, and other don’t.
My best advice is to get a free consultation from all of them you are considering. I think that will usually tell you all you need to know.
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