How to Recognize a Legitimate Credit Repair Company
In today’s world there is no shortage of people who are in debt where many of us use plastic and financing as the preferred payment method. An article published by the Consumer Financial Protection Bureau states one of their studies showing that more than 40 percent of U.S. adults struggle to pay their bills. If you are one of these people who are struggling to pay down their debts you are not alone and you do have options! The most difficult part about cleaning up your debt is how to weed through the false promises and only deal with legitimate sources that can actually deliver results. Unfortunately, there are many companies that will over promise and under deliver. Here at Debt Relief Corner we wanted to share with you some tips and pointers you can take with you when you are seeking additional help with your debts.
Six Signs How to Recognize a Legitimate Credit Repair Company
1. Credit repair company asks for upfront fees
This is the easiest sign to spot if a company is legit or not. Unethical companies often ask for upfront fees that may range from a few hundred to a few thousand dollars. DO NOT commit to any payment until these companies have delivered. Not only will you potentially be left with the same debts, your pocket might be a little less able to pay these debts after they have taken your money. This may appear to be an obvious red flag, but many people are so desperate to repair their damaged credit they fall into this broken promise.
It is because of these predatory companies that the Federal Trade Commission launched the Credit Repair Organizations Act to help protect consumers. This act requires credit repair companies to explain:
– Your legal rights in a written contract detailing the services they will perform
– Your three day right to cancel
– How long it will take to get results
– The total cost you will pay
– Any guarantees
2. You are not provided a copy of the “Consumer Credit File Rights Under State and Federal Law.”
By law, the credit repair company is required to provide you with a written statement titled “Consumer Credit File Rights Under State and Federal Law” before any contract or agreement is executed.
3. The credit repair company promises you a “new” identity.
Some shady credit repair companies claim they will be able to offer a new start and create a new credit file through a process called file segregation. File segregation works by either creating a new Employer Identification Number (EIN) or a new Social Security Number (SSN) to trick credit bureaus to have them create a new credit report for you. There are main two reasons why this is a tactic to avoid. The first reason is an empty credit line will most likely do you no good when there is no history to show and will obviously look very suspicious. More importantly, you may wind up in legal trouble. It is illegal to misrepresent your social security number and you could be charged with severe criminal charges including mail fraud, wire fraud and/or civil fraud.
4. The credit repair company promises to remove accurate information from your credit report.
Closely tied to #3, credit repair companies that claim to remove accurate information should be avoided. Who would want to work with a dishonest company in the first place? Some credit repair scammers may try to employ unethical tactics such as have you claim identity theft to try and remove accurate information from your credit report.
5. You are not given a copy of the contract to review before signing.
This is just bad business, but many people sign contracts without properly reading through them. Installing an app from iTunes is one thing but signing up to a credit repair service that could possibly dictate your credit future is an entirely different thing. You would not purchase a car without looking under the hood or taking it for a test drive, would you? The same should be said if you are about to enter a legally binding contract that will dictate such an important aspect of your future. You will not have to ask a reputable company for this contract since they should provide this to you upfront as part of their process.
6. The contract does not provide the required material listed in the Credit Repair Organizations Act.
As mentioned earlier, the Credit Repair Organizations Act mandates by law that every debt repair company outline the services they will perform, your three day right to cancel, length of time for results, your total cost, and any guarantees. If your contract does not contain all of this information then you may be working with a company that is not fully compliant.
Can You Trust Any Credit Repair Companies?
The good news is there are legitimate credit repair companies. Some of them are extremely large and due to their size are less likely to be able to get away with these fraudulent tactics since they are under the spotlight of the FTC. Also, everything a credit repair company can do for you can do yourself. It may be some extra work, but you might want to do some research on your own and see if there is anything you can do on your own. If you do happen to decide to work with a debt repair company make sure they consult with you first before discussing a strategy on reducing your debt. They should also make you aware of your rights and be up-front with what their capabilities are and what you can expect. These expectations should definitely not include promises to raise your credit score a specific number of points.
There are legitimate companies out there, but unfortunately there are ones to be avoided.