We have all seen the ads offering easy or instant credit repair. Maybe you have gotten spam in your email inbox promising to erase your bad credit, or even a text message. But can these companies really do what it says on the tin? Credit repair organisations are governed by a law known and this law requires any credit repair service to fulfill certain obligations to you. However, so of what they say can be faulse information, such as:
They can remove bad info from your credit record – What these companies will do is use techniques to make your credit report appear clean long enough to collect money. They file disputes against the debts on your credit report. When the credit ref agency receives a dispute, it must contact the creditor and the creditor has 30 days to verify the debt. If the creditor doesn’t respond before the deadline the disputed item from your report. The credit repair company can then show you a cleaner credit report and collect their pay. However, if the negative information is accurate, the creditor will respond eventually and the information will be put back on your report again.
Some credit repair companies offer consumers a “piggybacking” opportunity. Consumer A (good credit) adds Consumer B (bad credit) as an authorized user on Consumer A’s credit card account for a fee. Consumer A maintains good credit, which is reflected in Consumer A’s and Consumer B’s credit reports. (Consumer B is piggybacking on Consumer A’s good credit history.) This is a dangerous and costly process as personal information is exchanged. Credit reporting agencies are aware of these piggyback schemes and are no longer attributing Consumer A’s good credit to Consumer B’s credit report and score. Also some companies may tell you that they will deal with the creditors and all you have to do is send them regular payments. Supposedly, they will keep these payments in an escrow account to collect interest until there is enough in the account to cover the debt. Meanwhile, the credit repair company deducts regular administration fees from your account and your creditors are kept on hold.
If you are considering a credit repair service, remember there is nothing legally they can do to improve your credit that you cannot do by yourself.