I finalized a difficult divorce last year, and found out after the fact that my credit has been nearly ruined. I paid a fee to a credit repair company but they’ve made virtually no progress in repairing my credit. What could be taking so long?
I am often asked about credit repair agencies and if they provide a good service. I’m sure there may be someone out there that provides good credit “consulting” services, but I tend to see more damaged cause by credit repair agencies than good.
Most credit repair agencies are not in compliance with the Credit Repair Organizations Act since they are prohibited from charging or receiving any money or other valuable consideration for the performance of any service they have agreed to provide before the service is fully performed. However, most charge $200, $300 or even more before they will perform any service. How are they able to do this? The majority will claim it is a sign-up fee and does not relate to the services they have agreed to perform, which is a direct violation of the Act. If a lender refers a client to a credit repair agency they are inadvertently supporting a company that is violating the Credit Repair Organizations Act.
When you sign up with a credit repair agency you are required to provide a copy of your credit report. Since credit repair agencies do not have permissible purpose with the repositories (Experian, Trans Union, Equifax) to access your credit, they will often ask you to provide them a copy of the credit report you received from the lender. If the lender provides you the credit report with knowledge you will share it with the credit repair agency, they are in direct violation of their permissible purposes for pulling a credit report in the first place.
The majority of credit repair agencies will submit a dispute to the bureaus for inaccurate information. The bureaus then have 30 days to investigate and respond to the dispute. A credit repair agency may submit multiple dispute requests to the bureaus with multiple letters disputing the validity of an account.Because they receive so many letters in such a short period of time they don’t always have the resources or time to reasonably investigate each request and after 30 days they may remove the disputed account as they have not been able to resolve it within the 30 day period.
I worked with a borrower a couple of years ago that disputed their bankruptcy. I asked them if the bankruptcy was accurate and they said yes, but the credit repair agency recommended to dispute it to increase their score. Sadly, it did not improve their score and it delayed the loan process since we had to remove all the disputes on information that was correct in the first place. Credit repair can do nothing to improve legitimately unfavorable credit information.
Since you are paying a monthly fee, they may continue to send letters to the bureaus month after month. If you cancel the contract, the letters stop and the majority of the information that was removed will come back. Collection accounts are the worst since the initial disputes could cause them to report again which will result in a more recent report date and lower your score even more!
If there are truly inaccuracies on your credit report, there is nothing a credit repair agency can do for you that you can’t do for yourself. You can do this without the cost of what a credit repair agency will charge you. First I recommend obtaining a free copy of your credit report from all three bureaus at www.annualcreditreport.com. You will have instant access to the reports from the bureaus and, if errors are found, you can dispute them online at no cost. They also provide a toll-free number where you can reach a live person who can answer questions and assist you with the process. As I mentioned earlier, Federal law requires the dispute process be completed within 30 days however, it can be sooner than that. They also provide a fax number where you can send any supporting documentation regarding your dispute. If you advise them you have a mortgage pending they will often accelerate the dispute process.
If you have applied for a mortgage loan, most lenders provide rapid rescoring services that will correct information on your credit report. This can include removing an inaccurate late payment, a paid medical collection or updating the balance on your credit card. And lenders cannot charge you for rapid rescore services. When it comes to credit repair agencies, truly the answer may be to just say NO.
Branch Manager, NMLS #1721861
Cherry Creek Mortgage Co., Inc. NMLS 3001