Consumers Credit Repair Facts
Home & Mortgage
Have you ever wondered about thoseads you see from companies and lawfirms which offer to fix your creditfor a low monthly fee? People withcredit problems often ask me when itcomes to improving their credit scorewhether they should hire a creditrepair company or do it themselves? Unfortunately, there is no simple oruniversal answer to this question. However, I will shed some light on thesubject if youre in need of a littleenlightenment.
According to the Federal TradeCommission (FTC) "Everything a creditrepair clinic can do for you legallyyou can do for yourself at little or nocost". While I agree with the FTC Ialso understand some consumers do nothave the time, patience (or knowledge)to do the work themselves and thethought of "drive-thru-we-do-it-all-for-you-credit-repair" becomes veryappealing. After all, everything amobile oil change service can do for meI can also do myself at little or nocost (but you wont find me changingthe oil in my car this weekend!).
Although some things are betterdone yourself, only you can determineif doing your own credit restorationwork will be one of them. This is whyunderstanding both the advantages andlimitations of a credit repair companyand the structure from which itoperates are VERY important.
REFERENCES: Any legitimate company orindividual doing credit restorationwork for consumers will be able toprovide you with at least half a dozenreferences. If the company or personis local you should be able to callthese references. This is withoutquestion the most important point ofconsideration when hiring aprofessional to do the work for you.
If possible, I suggest you ask friends, family, relatives andprofessional contacts if they know ofsomeone who does credit restorationwork as a side business. By far thehighest percentage of successfulstories I hear from consumers are thosewhich come from those who found acredit consultant via personalreferral. I cannot stress this enough.Its the difference between going on avacation with a close friend instead ofa stranger.
CONTRACT: Unlike painting a house orputting in a driveway, creditrestoration work (and results) areextremely broad. Therefore, the use ofa contract is imperative. Most likelyyour credit challenges didnt occurovernight and they wont be improvedovernight either. A good contractprotects you as well as the serviceprovider. The contract should be easyto understand without an Attorney andspell out the actual services whichwill be rendered as well as the serviceproviders limitations (i.e. theycannot guarantee the removal of any oneparticular item but can guarantee anoverall increase in score overtime).
MONTHLY FEE: One of the most criticalelements which affects "how" a creditrestoration company operates isdetermined by its payment structure. One of the most common paymentstructures of large companies or lawfirms doing credit restoration is thatof the monthly "auto-debit" fee. Inthis structure the consumer usuallypays $49 to $99 up front and then amonthly fee of $39 to $49 per month. While there is an advantage to thismethod (affordability) with it comesmany disadvantages.
1.) The first disadvantage thisstructure creates is that it gives thecompany absolutely no incentive to workquickly or aggressively on behalf ofthe consumer. In fact, the opposite istrue. The longer they take the longerthey will continue to collect theirmonthly fee! In most cases thisstructure leads to slow results over avery long period of time. Looking atit logically, this shouldnt come as asurprise.
2.) The other challenge within thisstructure is the actual amount of time,effort and resources which a company orlaw firm can reasonably allocate on aconsumers behalf. Remember, any largebusiness has a tremendous amount ofoverhead which quickly chews up most ofthat monthly fee. Out of that $39 to$49 there are monthly expensesincluding but not limited to:Advertising, Office Rent and Utilities,Employee Payroll and Taxes, HealthInsurance, Phone Service, OfficeSupplies, Refunds, Computer Maintenanceand Programming, WebsiteAdministration, Office Supplies andlets not forget postage for mailingletters to creditors, collectionagencies and credit bureaus. A muchsimpler way to think of this is byimagining if you had a client payingyou $39 a month; how much work wouldyou be willing to do?
3.) One of the biggest challengescredit repair companies charging lowmonthly fees run into is being forcedto rely on the use of Automated "BoilerPlate" Dispute and CorrespondenceLetters. Boiler Plate Letters aresimple form letters which are used forALL consumers (one format fits all). Once set up in a computer program withthe consumers information they are"shot out" automatically based onthe consumers needs (i.e. late pay,charge-off,judgment etc).
The problem here is that when acredit repair company has thousands ofclients they are shooting these formletters out for, the creditors,collection agencies and credit bureauscan take notice of these letters beingused over and over and discover yourcorrespondence is coming from a thirdparty (i.e. credit repair company orlaw firm) and in some cases ignore itor (worse yet) mark the disputefrivolous and flag your credit report. I spoke with a man recently who was onthe inside of a large credit repaircompany who informed me they had anarchive of over 10,000 boiler plateletters on file to avoid this problem. Of course, they charged customers bythe month.
NON-DISCLOSURE OF METHODS: One of themost troubling issues with 95% of largecredit repair firms (especially lawfirms) is their non-disclosure ofdispute tactics and methods. As aconsumer it is vital that you are madeaware of the methods they are using indealing with your creditors,collections and the credit bureaus. Ifthe organization or law firm violateslaws or makes errors (I have witnessedboth) you could be held liable fortheir negligence. In addition, thiscan actually make your credit worse andcreate problems which are verydifficult to clean up. Anyone doingcredit restoration for you shoulddisclose "what" they are doing sinceyou are paying for a service. If theywont, you better run the other way asthey could be pouring gas on a blazingcamp fire.
LOCATED IN HOME STATE: This is one ofthe most overlooked keys to successfulthird party credit restoration whichconsumers miss. It is absolutely vitalwhen having someone else do your creditrestoration work for you that theyoperate within your home state. Hereswhy: if a credit repair company or lawfirm mails dispute letters orcorrespondence on your behalf fromanother state, that mail will bepostmarked from that state. If thecredit bureau catches this they can(and in many cases will) mark thedispute as frivolous and flag yourcredit file.
It is known that many Credit RepairCompanies and Law Firms will resort toor create a method to avoid and out ofstate postmark in order to get disputespostmarked from the consumers homestate (potentially violating postalregulations). For example. If they arein NY and you are in CA they will firsthave to mail your dispute lettersinside an envelope from NY to CA. Oncein CA someone opens the envelope andthen mails your dispute letters from CAso they postmarked from your homestate. I am not an expert on postalregulations but had one postal employeetell me the concept sounded extremelyshady at best.
CUSTOMIZATION: Its for this reasonthat some of the most advanced forms ofcredit restoration are done completelycustomized for the client and even (inmany cases) by hand. The best creditrestoration companies Ive seen areusually run by one person or a smallnumber of people and are extremelycustomized for each client. The is themost effective but with effectivenesscomes cost. Every one of theseservices I have seen charges a verylarge upfront fee and works entirelyoff of referrals. This type of serviceis simply impossible to perform for $39or even $49 a month.
Unfortunately, if you are unable tofind someone in your area (preferablyan individual) by way of referralthrough a friend, relative orprofessional contact, then I recommendyou take matters into your own handsand do it yourself. I realize mostconsumers do not want to hear this butthe good news is that it will almostalways turn out to be the highest paidwork you will ever do in your life. How high? How does $500 to $2500 anhour sound? I understand thats a boldclaim but not one I am unable to backup.
If youre ever going to finance afirst or second home (which everyoneeventually should for the tax breaks)the difference between good credit andpoor credit will affect your interestrate. If you secure a $200,000mortgage on a 30 year term and yourinterest rate is only 2% lower becauseof a high credit score, that 2% willsave you $96,934.11 over the course ofthe loan (just because you had bettercredit). Take that $96,934.11 anddivide it by the 30 to 50 hours you mayspend working on your credit situationand youll quickly realize creditrestoration when done properly does notcost - it pays!
This is the end of our "7 ArticleSeries" for the "Credit Secrets Bible".Hopefully this convinces you to buy it.Order your copy now by going to thewebsite below. After all, you deserveit!
=======================================Terry Price is the founder of ConsumerEducation Group which publishes theCredit Secrets Bible (in print since1994).
For more information on the CREDITSECRETS BIBLE you may visit:
About the Author
Terry Price is the founder of ConsumerEducation Group which publishes theCredit Secrets Bible (in print since1994).
For more information on the CREDITSECRETS BIBLE you may visit:
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