Archive for the ‘Credit Repair’ Category

The statistics on the number of marriages that end in divorce are varied and open to interpretation, but what is certain is no one who enters a marriage with the person they believe to be their perfect match plans to experience the agony of dissolving the union.

As exhilarating as it is when you think you have found the person you will spend the rest of your life with, the realization that it is not meant to be is just the opposite. And if it wasn’t enough that the lifestyle two people have worked so hard to create is torn apart, a divorce can also wreck havoc on a person’s credit score. After the emotional and monetary sting of a divorce has started to subside, many people find they have also lost their good credit rating along the way.

The credit reporting system leaves much to be desired when it comes to accounting for a divorce and this is what makes a divorce one of the five credit killers according to the book “Credit Revolution: Path of the Smart Consumer.”

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The credit reporting system isn’t perfect. Just ask Ken Clark from Little Rock who was turned down for a vehicle loan and accused of being a con man by the auto dealer because his credit report was marked “deceased”.

Credit reporting errors like these are surprisingly common, and this makes sense in a system where so much information is exchanging hands everyday. Even errors with a “one in a million” chance of happening will happen 3,500 times every month when you factor in the 3.5 billion pieces of account information the credit bureaus receive from lenders per month.

Then factor in systemic flaws in the system and credit errors are much more common. For example, the algorithms used to match loans to credit files use partial matches in some cases. Because of this, someone else’s loan could end up on your credit reports if your name and Social Security numbers are very similar.

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Daniel from New York wrote into CNBC’s “Ask The Experts” feature with the following question:

“Are there ANY credit repair companies that are legit? I’ve used a couple and both times they have been scams. I obviously won’t do it again but people should be aware if they are all trying to rip you off!!”

His concern is valid. There are all too many credit repair clinics out there who are much more interested in separating you from your cash than in helping your credit situation. But the response he received is even more concerning.

In her response to Daniel’s question, Carmen Wong Ulrich host of the program “On the Money” states:

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The USA.gov website has a recently updated list of popular New Year’s resolutions. As evidence of how important credit is in today’s society, two of the first three resolutions listed are related to your credit standing.

The top five New Year’s resolutions listed on the page are to lose weight, manage debt, save money, get a better job, and get fit.

If these are among your New Year’s resolutions then it is in your best interest to pay special attention to your credit score in 2009. By increasing your credit score, you may be able to get approved for lower interest rate loans or credit cards. Refinancing your mortgage at a lower interest rate than you are currently paying could end up saving you hundreds of dollars every month which would not only help you achieve your resolution of saving money, but it could give you a great head start on managing your debt.

Add to this that in some cases, a good credit score is required for you to get approved for that new dream job and there’s one more New Year’s resolution where your credit comes into play.

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Sometimes, credit problems can seem insurmountable. While the average consumer hopes to increase their credit score so they can shave a few percentage points off their mortgage rate or get a low interest credit card, there are many consumers whose credit rating essentially excludes them from the credit game entirely. They are being denied loans at any interest rate and the dream of owning their own home is nothing more than that; a dream.

It is people in this category that have lost hope and begin to look to illegitimate methods of credit repair. They start looking into credit repair clinics who promise a way to completely start over. Clinics who claim to be able to create a brand new credit identity and a brand new credit report - clinics that seem to have the perfect solution to a hopeless situation.

Most people realize that when something sounds too good to be true, it usually is. Even the people who fall for these credit repair scams probably know the clinics that provide these services are not to be trusted. But when faced with the prospect of having a repossession, foreclosure, or bankruptcy on their credit reports for years to come, they become desperate enough to do things against their better judgment.

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