Credit Repair Services?

Hi Paul. This is a good question because many people, especially today, are going to be looking for ways to improve their credit reports and credit scores. And, many of them are going to look to hire credit repair agencies.

Let me explain very clearly what these companies do and how you can do the same exact things for free.

When you hire a credit repair company you give them limited power of attorney. This means they can sign your name. Then, they access your credit reports through one of a variety of ways (not all of them legitimate and legal). After they pull your credit reports they identify anything that is negative, regardless of whether or not it's accurate. And then they get to work...

They will write dispute letters from their many templates and challenge the accuracy of the negative information. Then they send these letters to a local FedEx Kinko's or UPS Store and have them mail them to the credit bureaus from your local postage area (this way it gets a local postmark and doesn't stand out as much to the credit bureaus).

Basically they are playing the "30 day game." The Fair Credit Reporting Act mandates that the credit bureaus complete their investigation pursuant to your disputes within 30 days. If they do not then the information has to be removed or changed in your favor. What these credit repair companies are banking on is that your disputes somehow get lost in the system thus resulting in the deletion of negative and 100% accurate information.

If the disputes come back as verified as accurate then they launch another set of dispute letters and slightly modify the wording. "No, I didn't mean it wasn't mine...I meant that I was never late."

This continues month after month after month. And, you pay a monthly subscription that gets billed to your credit card.

And, many of these companies have fashioned themselves into fake law firms. (Google the term "credit repair" and you'll see what I mean). Law firms are exempt from the Federal and state level credit repair laws. The problem is that these companies aren't law firms, don't practice any law, don't really employ the typical types of people you'd find at a law firm, and are all around unethical. Most of them either have been or are currently being sued or investigated.

Basically credit repair firms are glorified letter writing services. Of course, you can write your own dispute letters month after month and save the monthly fee.

Here are some things to consider before doing business with a credit repair company (you won't hear these things from them)

1. If your dispute letters are identified by the credit bureaus as being from a credit repair firm then they can flag your credit reports and stop considering any dispute that they consider to be frivolous.

2. If something is removed after the 30 day period expires BUT the creditor verifies it after the 30 days...it goes right back on your credit reports.

There is no such thing as a "good" credit repair service and I don't endorse any of them or what they do. They prey on the undereducated who don't know that they can dispute their own credit reports for free.

Some sources estimate that 30-50% of all disputes received by the credit bureaus are the result of credit repair companies flooding the system with frivolous letters.

No legitimate credit industry professional believes that these companies provide a valuable service.

You can do the same things they do for the cost of a stamp, envelope, and a pen.