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 Despite
the phenomenal claims made by most credit repair companies, all they do
is dispute tradelines in the name of the consumer. The filing of a
consumer dispute is the only method anyone other than the creditor, a
credit reporting agency or the repository itself has to affect change in
any repository file. A credit repair company cannot do anything the
consumer cannot do themselves for free and faster, in fact – they cannot
even obtain a copy of the consumers’ credit report as credit repair
companies are prohibited access to Experian, Trans Union and Equifax.
Consumers can obtain free copies of all
three repository files in minutes at
AnnualCreditReport.com
and if errors are found, dispute them online at no cost. They are also
provided a toll-free
number to reach a live person that can
answer questions and assist them with the process if needed, including
faxing documentation all at absolutely no cost.
Except for
credit rescoring, this is fastest method possibly of updating a
consumers credit file.
A Warning For Mortgage
Professionals
Over the years we have seen
many audits conducted by the repositories that result in the termination
of that broker or lenders access to credit data. These audits are often
triggered by borrowers, who at the recommendation of credit repair
companies, frivolously dispute items contained in a credit report
provided to them by a mortgage broker. The repositories monitor patterns
on disputes received, matching them to recent inquires into that
consumer’s credit report.
Each individual repository (Experian, Trans Union and Equifax) regularly
publishes its own “alert” list of mortgage companies and individuals
which are barred access to that repository’s database of consumer credit
files. Due to the predominant requirement of the three bureau
merge credit report within the mortgage industry, all mortgage company
end-users should be acutely aware of the ramifications of engaging in
barred credit repair activities. Engaging is such barred
activities may result in you or your company being added to any or all
three repository alert lists, preventing access to a tri-merge credit
report and severely hampering your ability to originate mortgage loans.
Credit Repair Warning Signs Include,
Charging Up-Front Fees in
Violation of Federal Law
Many credit repair firms
violate federal law by requiring up-front fees often disguised as
"account set-up" or analysis fees. Some require you to purchase a
training manual for hundreds of dollars just to access "free" credit
repair.
Credit Repair Organizations Act -
Public Law 90-321, 82 Stat. 164 “404. Prohibited practices.
b) Payment in Advance.-- No credit
repair organization may charge or receive any money or other valuable
consideration for the performance of any service which the credit
repair organization has agreed to perform for any consumer before such
service is fully performed.” The
entire text of the CROA is available at
http://www.ftc.gov/os/statutes/croa/croa.shtm
Does Not Accept Credit
Cards (or attempts to disguise PayPal®
as a merchant account)
This is an important warning
sign, it often means the firm is unable to gain approval to process
credit cards (a physical inspection and positive financial history is
required). Companies with questionable pasts or practices instead will
often require you pay using a third party credit card processing
company, check by phone, ACH/direct debit or other means which may
provide less protection in the event of fraud. Some will demand
post-dated checks before providing any service (you're expected
to trust them with your confidential credit and banking information, but
they don't trust you for payment.)
*PayPal®
is a registered trademark of PayPal, Inc.
Web Based, No Physical
Location or Allows Contact by Email Only
Any company can provide a
few positive references, do some homework on any credit repair
firm before sharing any confidential credit data or credit card
information with them. You can verify how long their website has existed
using any domain lookup tool such as
http://www.domaintools.com/
You will often find that although they may claim to have been in
business for "decades", in reality their websites are are newly formed.
Many credit repair companies found on the Internet are simply re-selling
services provided by other companies - so you're often unable to
determine just who will have access to your personal information.
Mortgage professionals -
Before recommending your applicant dispute items on his/her credit
report (either directly or through a credit repair company) it's
important that you first talk to your credit reporting agency – here are
a few reasons why,
-
If you are looking at a
tri-merge report, you do not know what is being reported by each
repository. In many cases, you can’t even tell which items to
dispute through which repository. The merge logic used to produce
the tri-merge report might be responsible for the error you are
viewing, in which case no dispute of the repositories is needed.
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If your borrower
disputes any tradeline, that item is locked from any further actions
until the dispute is resolved. It might have been possible through
re-scoring
tools to correct the item in as little as 72 hours. This would
no longer be an option once a dispute is lodged.
-
There are other options
that are much faster than filing a dispute (such as e-Oscar whereby
the tradeline can be updated in minutes.)
-
It is possible that
removing an item (even if that item contained derogatory data) can
cause a drop in the FICO score, or worse yet – that item might have
been part of the minimum required to produce the FICO score. Once
removed – you’ve lost your FICO score entirely. You can’t un-ring a
bell, unless you are certain of what you’re dealing with and the
resulting change (if any) on the credit score, it’s best to have
your credit reporting agency confirm your actions will provide the
expected results.
Unforeseen Credit Repair Dangers for Consumers
Besides the monetary risks associated with credit repair, the actions of
a credit repair company can damage your credit score. Most credit
repair companies simply dispute every derogatory item appearing on your
credit report. Those creditors that verify the disputed items often
update the data reported to the repositories including the reporting
dates. The result of frivolously disputing tradelines often results in
lowering your FICO scores. The dispute process also means you are
providing your current address to creditors, which can also result in
new collection contacts and phone calls.
Please note -
AnnualCreditReport.com works
very well for correcting any errors appearing on any of your credit
reports,
but does not include your FICO scores. The only place to
obtain your credit reports (Trans Union and Equifax) WITH your FICO
scores is
MyFICO.com.
Please note: The Experian credit report is not available on
MyFICO.com. Currently there is no direct to the
consumer access to a true FICO credit score based on Experian data.
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