The Truth About Credit Repair Services
By
Easy Tips
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Saturday, 21 July 2018
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Credit Tips
Want to know the truth about credit repair services, Most of these credit repair offers are scams. In fact, according to the Federal Trade Commission, attorneys at the nation’s consumer protection agency have never seen a legitimate credit repair firm making those claims. The truth is that there really is no quick fix for credit damage. Most credit repair services offer nothing in exchange for money you can’t afford to spend. You can improve your credit legitimately, but it takes time, effort and most importantly, sticking to a personal debt management plan.
How Can You Tell If It’s a Credit Repair Scam, Every day, credit repair firms target consumers who have poor credit histories, promising to help clean up their credit report so they can get a car loan, a mortgage or even a job. The fact is, a credit repair firm can’t remove accurate negative information from your credit report to improve your credit. The company wants you to pay for credit repair services before they provide anything. Under the Credit Repair Organizations Act, credit repair companies cannot require you to pay until they have completed the services they have promised.
The company doesn’t tell you your rights and what you can do for yourself for free. The company recommends that you do not contact any of the three major national credit-reporting companies directly. The company tells you they can get rid of most or all of the negative credit information in your credit report, even if that information is accurate and current.
The company suggests that you try to invent a “new” credit identity — and then, a new credit report — by applying for an Employer Identification Number to use instead of your Social Security number. The company advises you to dispute all the information in your credit report, regardless of its accuracy or timeliness.
If you follow illegal advice and commit fraud, you may find yourself in serious legal trouble. It’s a federal crime to lie on a loan or credit application, to misrepresent your Social Security number and to obtain an Employer Identification Number from the Internal Revenue Service under false pretenses. You could be charged and prosecuted for mail or wire fraud if you use the mail, telephone or Internet to apply for credit and provide false information.
It's not enough to know your credit score; you need to know the ugly details behind that score. This means looking at your credit report to see what problems have been reported. Knowing what's on your credit report will give you an opportunity to check for errors, and help you prioritize how to address your outstanding problems.
Radio, television and the internet are full of ads for credit-repair services promising to make your credit problems go away. It's not that easy. Be very wary of for-profit-credit-repair services. These ultimately just add to your expenses and, in the case of debt management services, may cause you to lose control of when and whether payments are actually reaching your creditors.
If you need outside help, you might benefit by contacting the National Foundation for Credit Counseling to see what not-for-profit-debt-counseling services are available in your area. People sometimes respond to credit problems by swearing off debt. That reaction is understandable, but don't be in too much of a hurry to close your credit accounts. The percentage of available credit in use affects your credit score. If you start closing credit accounts, this percentage may increase and hurt your credit score.
The average age of credit accounts is also a factor in credit scores, so closing older accounts may be particularly harmful. Lay out all your outstanding debts, including whom you owe, when payments were due, and what the interest rate is. Now you can start prioritizing where your money should go first. The more overdue a payment is, the worse it looks on your credit report.
So catching up on the most delinquent payments should be your first priority. Also, to the extent possible, pay down higher-interest accounts first and, if possible, shift balances to lower-interest accounts -- but do so without opening any new accounts. If there are payment schedules you simply can't make, negotiate with your creditors for a more workable payment schedule.
This is not easy, but it is preferable to simply missing payments and having the problem get worse. If creditors see that you are willing to make a good-faith effort toward paying off your debt eventually, they may be willing to work with you. However, your goal should not be to get them to write off a portion of your debt, because this can cause more lasting damage to your credit report. Yes, using credit got you into this mess, so it may be hard to see how it could be part of the solution.
However, since payment history is part of your credit score, if you respond to credit problems by ceasing to use credit altogether, all that will remain on your credit report is the negative history that got you into trouble. Make a budget that allows you to use a credit card judiciously while paying off any new charges in full (and reducing any existing balances) every month. This will help you establish a more positive payment history without adding to your long-term debt burden.
Zero-percent-balance-transfer offers may seem like an appealing way to reduce your credit expense, but be advised that new credit applications can hurt your credit score, as can lowering the average age of your credit accounts. If you have any credit card accounts where you have a solid payment history, try requesting a higher credit limit. The idea here isn't to run up more debt, but adding to your credit limit can reduce your ratio of debt utilization without the damaging impact of opening a new credit account.
Despite what some advertisements may imply, there is no magic formula for rebuilding your credit score quickly. This is a marathon, not a sprint, so it may take a long time to reach your destination. However, if you take the right steps and avoid further mistakes, it shouldn't take too long before you can start to see progress in your credit score. That progress should encourage the positive habits that will eventually fully repair your credit.