From Rags to Ritches

Credit repair companies: good, bad or just plain useless?

Dec
09

Can credit repair companies really fix bad credit reports? These companies claim they can, but the industry has a bad reputation and scams have been widely reported in the media. According to credit industry regulators, reputable credit repair companies are few and far between.

The most common complaints centeron:

charging fees for services that clients could do for themselves

overstating their ability to improve a credit rating

contracts that include excessive termination fees

withdrawing funds from clients’ bank accounts without authorization, or after the client has said that they intend to cancel the contract.

There are times when credit repair does actually work. For example, removing legitimate errors from a credit report. In fact the main function, arguably the only function, of credit repair companies is to remove errors from credit reports. They could be errors in reporting from lenders, or errors in the client’s personal information. But removing these errors is not difficult – in fact, most people could do it for themselves.

Some credit repair companies will offer to negotiate with creditors but, not all creditors will engage with credit repair companies. If, after taking into account all of the above, you do decide to try a credit repair company, look for three things:  longevity, reputation and a money-back guarantee.

Remember their services don’t come cheap. Signing up for a credit repair service could increase your financial problems rather than fix them.

What steps can YOU take to repair, fix or improve your credit report? Here are a few:

request a copy of your credit report and check that it is accurate and fair. If not speak to the credit reporting agency – they may be able to fix the errors straight away

seek out a reputable financial counselor who will work with you on a plan to pay off your creditors

talk to your creditors – at the end of the day they want to be paid. If they know that you are taking meaningful steps to address your debt problems they might cut you some slack

be honest with your creditors – if you foresee a problem let them know straight away. Many utility companies, in particular, will invite you to contact them if you are having problems paying a bill.

The important thing is to contact them before the due date. This will help you avoid slipping backwards down the bad credit slippery slope. You don’t want to undermine your progress.

The most useful piece of advice is to set a realistic time frame and stick to it. It may take a year or two, or even more to wind back that bad credit report but in the end it will be worth it. Remember to acknowledge your milestones as you pass them by. When you finally repair your credit report you will have learned some valuable lessons. The most valuable is that your financial health is in your hands.

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