Are Credit Repair Companies Legitimate?
In a perfect world, you could trust everything you see or hear. Everyone would take care to treat everyone else fairly and those who claim to be in the business of helping you out could be counted on to work towards that end. When you signed up for a service, you could expect that the company collecting your payments would fulfill their end of the bargain.
Ideally, this would be the case. In real life, however, not everyone sees things the same way. There are people that make empty promises, misrepresent their abilities, and otherwise work to take more from people than they provide in return. Credit repair companies are no exception and while there are many, many credit repair services that keep the best interests of their customers firmly in their sights, there are other credit repair clinics who focus on taking advantage of those they claim to be helping.
The credit repair industry, like many others where the hopes and dreams of people are involved, is one that has proven ripe for abuse. Credit is an incredibly important tool in today's society. For most people, credit is what enables them to achieve the dream of owning a home, realizing financial security, and providing a desirable lifestyle for their families. With the stakes being so high, people can become desperate when they learn their credit score is standing in the way of their goals. Combine this desperation with how little the average person knows about the credit system and you have a segment of the population that is primed to be taken advantage of.
Preying on those searching for a way to get their credit on track, credit repair scams provide people with hope only to take their money, waste their time, and sometimes even put their good name at risk.
Traits of a legitimate credit repair company
But as stated before, there are legitimate credit repair companies who not only aim to give people hope, but work to help people move closer to achieving their credit goals. So given that there are legitimate credit repair companies as well as companies to be avoided, finding a company in the former group is the first step in getting the most from a credit repair service. Below are some traits you can look for to help determine if a credit repair company is legitimate.
Legitimate credit repair companies......will only charge for credit repair services after they have been performed.
The most basic of credit repair scams is one in which a company (or individual) promises to repair your credit after receiving an advance fee. Frequently, this initial payment amounts to many hundreds or even thousands of dollars and once paid, the credit repair provider disappears. Not only are you left with the same credit score, but you're pocketbook is considerably lighter.
As is the case with many similar scams, it seems an obvious red flag to be required to provide so much money up front, but considering how desperate people can be to improve their credit score and the potential benefits of a clean credit report, many people are willing to take the risk.
It is because of this that the Credit Repair Organizations Act specifically forbids any credit repair company from accepting payments in advance. According to the act, "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."
Lexington Law does not charge in advance.
Legitimate credit repair companies......will inform you of your right to repair your credit yourself.
Everyone has the right to order their credit reports and to dispute the questionable negative items in their reports without the assistance of a credit repair company. In fact, anything a credit repair company can legally do for you, you can do for yourself.
To ensure that credit repair customers are informed of these rights, the Credit Repair Organizations Act also requires that a written statement titled "Consumer Credit File Rights Under State and Federal Law" be provided to all consumers "before any contract or agreement between the consumer and the credit repair organization is executed."
This is an easy way to tell if a credit repair company truly has your best interests in mind because while this information may seem trivial to some, it is almost as important that you be presented with this document as what it actually says. If a credit repair company does not follow the letter of the law, they are putting themselves at risk of being shut down. Considering that the credit repair process may take up to a year or more, the last thing you want is to trust your credit to a company that may not be around long enough to finish the job.
Lexington Law clearly informs clients about their rights regarding credit repair and, in accordance with the law, provides all clients with the required documentation....will never advise you to create a "new" credit identity.
Known as file segregation, some shady credit repair clinics claim to be able to create a new credit file. They claim to give people a fresh start, but in truth they are peddling an illegal "credit repair" solution that could end up causing legal problems for the company and the customer.
File segregation works by using an employer identification number or a new social security number to trick the credit bureaus into creating a new credit report for you. Then, when applying for loans, filling out job applications, or providing information to anyone else who will access your credit reports, you use the new number in place of your actual social security number. When your credit reports are requested, it is the clean report that gets returned.
It may seem like an easy way to hit the reset button on your credit, but file segregation is never worth it. For starters, an empty credit history will not do much for your credit score and will certainly look fishy to anyone who pulls your reports. But more importantly, it is a federal crime to misrepresent your social security number and you could be charged with mail, wire, or civil fraud depending on how you attempt to use your "new" report....will never promise to delete accurate information from your credit reports.
In fact, a credit repair company shouldn't even attempt to dispute information you feel is 100% accurate. And beyond that, credit repair companies are not being completely honest with you if they promise to delete any information from your credit reports.
It is impossible for any credit repair company to guarantee that an item on your credit reports will be deleted. Ultimately, whether or not that item remains listed depends on the credit bureaus and the creditor who reported it. Credit repair companies can employ a full arsenal of credit repair tactics and even go so far as to sue the parties involved, but there are no guarantees they will prevail. At best, a credit repair company can promise to work your case to their full capacity.
Lexington Law only disputes information on our clients' credit reports that they have indicated may be inaccurate, untimely, misleading, incomplete, ambiguous, unverifiable, biased or unclear, and while past clients have seen impressive results from our credit repair services, Lexington Law cannot promise a specific outcome on future cases.
Finding a company that matches these four traits does not necessarily mean you have located the best credit repair company for your specific situation, but it is a good start and is a good way to help weed out companies looking to take advantage of you.