BEWARE: The Dangers of Credit Repair Companies

Credit repair companies can seem enticing to those interested in purchasing a home or fixing a current financial situation. Some people believe they must improve their credit score and remove negative items from their report to qualify for a mortgage loan. 

Unfortunately, this is when people often turn to credit repair companies for help.

What You Should Know About Credit Repair Companies

Mortgage and credit report experts warn that the services of credit repair companies can be far more harmful than helpful to most people. 

In most cases, people are being charged hundreds of dollars by these companies to go in and dispute everything on the credit report—good or bad. Often, information is not removed from the credit report as promised. Furthermore, deleting good credit can worsen things for the person trying to improve their credit score.

Before you, your friends, or your family members agree to work with a credit repair company, there’s a lot you should know.

Firstly, this is never a free service—credit companies charge a monthly fee. The fee is usually around $100 or more.

If a creditor they’re disputing with fails to respond within 30 days, the information is removed from the credit report.

Most creditors have a system to prevent accurate information from being deleted, so this method does not help the consumer. So, they’re paying a fee with little results.

How Credit Disputes Work

It’s important to know what’s on your credit report. You can pull a free credit report online at annualcreditreport.com from all three bureaus: Equifax, Trans Union, and Experian. The only time you should dispute information is when it’s inaccurate.

Once a credit repair company files a dispute, the credit reporting agency will contact the creditor to verify the information. Creditors will remove inaccurate information. If the information is accurate, it remains for the appointed timeline.

Negative information such as collections, charge-offs, judgments, and accounts reported late during the loan’s term remain on the credit report for seven years from the last activity or first delinquency date. Items are removed from the credit report once the seven years are up.

Alternatives to Credit Repair Companies

Members often ask me if credit repair companies work. My answer to them is this:

“When something sounds too good to be true, it usually is.”

If these credit repair companies could actually clean up credit, everyone would have perfect credit.

There’s nothing a credit repair company can do for you that you can’t do for yourself. These companies often promise to repair a person’s credit but deliver little results.

The money paid to credit repair companies can go toward paying creditors. Once the bills are paid, you can ask creditors to remove them from your credit score as a one-time courtesy. 

I encourage everyone to speak to a financial professional before signing up for these services. A credit counselor or someone within the mortgage industry will advise you on the best way to improve your credit score.

Do you have any questions about credit? Let us know in the comments below, and we’ll answer them in an upcoming video or blog post!

Pelican State Credit Union

Once a Pelican State CU member, always a member—through life’s milestones, we’ll always be there to help you with your financial needs. Your Financial Family for Life. Give us a call at 800-351-4877.

www.pelicanstatecu.com