Avoid Getting Ripped Off By a Credit Repair Company.
Posted on September 9th, 2007 by Marc Chase Posted in Credit Repair | 17 CommentsFor the last 5 or 6 years I’ve been telling our members how ugly of an industry credit repair and debt settlement is. I’ve also said that sooner or later the FTC would shake out the bad apples making it a safe place for consumers again.
It looks like my prediction was wrong. It’s gotten worse…much worse!
Regulatory bodies have cracked down as much as they can, but so far their efforts have been in vein. With the current economy, the housing market collapse and bankruptcies soaring, it’s just too much temptation for the scam artists to resist.
To make matters worse, it’s not just the typical opportunists popping up to ride the wave of opportunity. Some of the larger firms have tried to grow so fast that they’ve thrown away the true value in their services and turned themselves into worthless chop shops.
The fast buck money makers aren’t what scare me so much. Typically with any amount of common sense they’re not too hard to spot. It’s the latter of the two that scare me and here’s why.
A few years ago there weren’t too many real credit repair companies out there. The legitimate ones were actually able to do a good job. Thus, they racked up some nice testimonials, affiliations and word of mouth.
However, in an effort to grow too fast and capitalize on this poor economy, they’ve thrown value and results out the window and replaced it with overseas outsourcing, dispute templates and poor service - yet still hide behind the accolades they earned years ago when they actually provided a service.
Here is what I’d look for in any credit repair company – despite their past record.
Problem – Horrible Reputation: In my opinion there is no excuse for a BBB complaint (perhaps one or two) in this industry and here’s why. We don’t charge a lot of money for our services. On average a legitimate credit repair company should charge anywhere from 35 to 90.00 per month max.
Before any complaint escalates to the level of a BBB intervention the consumer will contact the credit repair company with their complaint. At that point the company has an opportunity to make it right. Any company who values a couple dollars over a consumer’s trust and their reputation is not a company I would do business with.
Solution: To check the record of any company go to http://search.bbb.org/ simply type in their web address and you can see their track record whether they are members or not.
Problem - Overseas Outsourcing: Here’s the scary one to me. A current trend in the industry for some of the larger credit repair companies is outsourcing the work overseas to places like India, Nicaragua and Russia. Now let me say I don’t have a problem with these places or the people in particular.
However, it’s just a simple fact that the security and regulation may not be up to our standards and it’s something you should know about before you sign up.
When you sign up with a credit repair company here in the United States and give them your most precious information, wouldn’t you like to know before hand that your credit file is being faxed overseas?
Solution: Before signing up with any credit repair company simply ask them point blank. Does any part of their work get outsourced overseas? If so, I personally wouldn’t hire them.
Problem - Partial repair: 99% of every client we’ve ever had needs intervention on all levels. That means disputes with the credit bureaus, collection Agencies, Attorney’s and original creditors. Most companies are only disputing on the credit bureau level (see generic template paragraph)
I would have to look long and hard for a client who didn’t need us to contact collectors or attorney’s, or negotiate their debts. I don’t think we’ve ever had a client who a letter to the credit bureau only fixed all their problems.
Solution: Simply ask them this… Will you contact the collection agents, attorney’s and negotiate my debts if necessary? If they won’t, you’re not getting everything you probably need to fix your credit.
Problem - Worthless Dispute Templates: Same problem as always. Generic dispute templates that are used over and over for every client are next to worthless. Do you seriously think the credit bureaus can’t spot them a mile away?
Solution: Simple! Ask them for a copy of any letter before it goes out. They are disputing on your behalf; you have the right to know what they are saying, if it looks something like this. I would drop them like a bad habit.
“I just pulled my credit report and am disappointed that you have errors. I was never late on this account, under the laws of the FCRA please update that to never late and send me a copy of my new report”
The template changes a little here and there but you get the picture. If it doesn’t look completely unique to your personal credit file, it’s a template and a waste of your money.
Problem – Being left in the dark: Credit Repair companies charge you by the month (at least the legitimate ones do) and obviously milking your account for as long as possible is in their best interest.
You need to be able to track when and what is being done. Credit bureaus and collection agencies have 30 days plus mail time to respond to all disputes. If the credit repair company doesn’t have a backend you can track exact timelines then you’ll never know if an extra week or two or three is being added to your account.
Solution: Personally, I would opt for a company that has a backend you can log onto 24/7 and track notes, progress etc. Otherwise, you just have to hope you’re not being ripped off.
The above are the most common red flag warnings I see. No matter who you choose to repair your credit I would ask every one of those questions and research every item there.
That and a little common sense and you should do fine
this is an eye opener, thanks for this post.
You’re very welcome.
Marc,
I have a question for you. My sister opted to go with a debt consolidation company to fix her credit. She paid them a sum of $276.00 and gave them the accts that they needed to negotiate. Unfortunately they didnt do anything for her and she called and told them that she wanted to opt out of their services (2wks into it)they told her that they felt sorry for this but could not reimburse her for the payment. Is this legal??
The laws and licensing requirements vary. However, the FTC, AG’s etc are very, very strict on this industry.
Best thing she can do is request it back and notify them that she will be filing complaints. If they have any common sense, that 276.00 is not worth the headaches it can cause them…not to mention good old fashioned customer service
Dude, if I found my stuff in another country without my permission, I’d be in my attorney’s office so fast
I agree that the overseas outsourcing is absolutely frightening. But, all of the problems you list are very real and your solutions seem pretty spot-on.
Who is outsourcing?
If I know you., you’re not going to say are you?
No, I’m not going to name names and you know that. Just please use common sense and you’ll do just fine
What is the difference between a hard pull and a soft pull on your credit?
A hard pull is when a creditor pulls your credit. i.e. Mortgage lender, Credit Card Company, auto dealership etc.
Soft pull is if you do it yourself like at myfico.com, annualcreditreport.com
Hard pulls hurt your credit, soft pulls dont.
What if I let a credit repair company pull my credit for me, does that hurt my score?
A credit repair company should not be puling your credit. There is an exception to that however. We will help our clients pull theirs via http://www.annualcreditreport.com
We do that because its convenient for the consumer and its a soft pull. Some credit repair companies have a “friend” or a loan officer that they pull through and thats a no no
unless of course the LO pulls it for the purpose of a loan first
A credit repair company that I have consulted requested that they be given written permission to pull my credit so that they could have all 3 reports on one. Is that not ok?
Well, Im not going to get in the middle of that. I would ask them where they are getting it and if its a hardpull.
Are they charging you for it?
It’s included in the start up fee. I’m just wondering if it’s legal now.
I’m really glad I found this forum, I’m really starting to 2nd think if I should do this or not.
Thank you, I’m glad you appreciate it. Now, credit repair is about the sleaziest industry I’ve seen in a long time.
That’s not to say there aren’t good companies out there. Just do your homework, listen to your gut and hopefully you’ll do fine.
Just keep your wits about you.
So is it legal for them to do that?