What do "credit repair" places REALLY do, and is it effective...?
June 3, 2013 11:02 AM Subscribe
Is it worth it? Your experience? Is it something you can you just do it yourself...?! Recommendations on which one to use?
If there is information on your credit report which is accurate, nobody can remove it. If there is inaccurate information, you can contact the credit bureaus and have it changed yourself. I doubt that anything that "credit repair" companies promise is legal or possible or worth paying for. Contact the credit bureaus (Experian, Equifax, and Trans-Union) and request a copy of your credit report, look it over, and dispute anything wrong yourself.
posted by epanalepsis at 11:13 AM on June 3, 2013 [1 favorite]
posted by epanalepsis at 11:13 AM on June 3, 2013 [1 favorite]
Try going to your bank/credit union (I strongly suggest a credit union) and sitting down with a personal banker to see if they can help you. They can set you up with some different kinds of loans and payment plans to help you pay off your debts more carefully.
A few weeks ago, I meandered in to deposit a check and left half an hour later after A) halving the interest rate on my auto loan, saving me $1000, and B) recognizing that simply applying my tax return to my credit card bill (wedding crap) raised my credit score like wow, making item A possible.
posted by Madamina at 11:19 AM on June 3, 2013 [1 favorite]
A few weeks ago, I meandered in to deposit a check and left half an hour later after A) halving the interest rate on my auto loan, saving me $1000, and B) recognizing that simply applying my tax return to my credit card bill (wedding crap) raised my credit score like wow, making item A possible.
posted by Madamina at 11:19 AM on June 3, 2013 [1 favorite]
Best answer: There is nothing they can do that you can't do easily yourself.
And yes, many of the unethical ones will suggest you dispute everything on the report with the hopes that a creditor or two won't or can't prove the claim. Technically speaking that isn't really legal. You are not allowed to dispute every credit item. Only items that you really believe are inaccurate.
Disputing your credit can even hurt your credit temporarily. Many lenders won't loan at all if you have a substantial number of disputes. They ask that you wait till the dispute is resolved one way or the other.
That being said there are a large number of inaccuracies in credit reports. There are cases of mistaken identity, failure to update a debt has have been paid, etc etc. Correcting those will help but you don't need another company to write a letter.
Something else to keep in mind. If you have a bad debt that is old and hasn't been updated in the last year, you can usually ignore it. If you own Fingerhut $25 from 2009 and the last time they reported it to the credit bureau was 2011 paying them off could hurt you.
If they haven't asked for any money since 2011 they have pretty much given up on it. If you send them their money they will be grateful and will update the bureau that you paid the debt in full. You would thin that would be good. EXCEPT, they'll be updating the bureau. The 2011 debt that no one cared about will be a 2013 debt. Yes, one that has been paid, but your average lender won't care about that. They'll just see it as a current debt instead of an ancient one. Paying off such debts can lower your credit score.
If the derogatory info is correct there is no 'repair' possible other than time. Lenders only care about your recent history. Start paying everything on time. Keep you account balances as low as you can. Revolving accounts should ideally be no more than 50% of your limit. If you have a credit card with a $500 limit keep the balance at $250 or less. Maxing out your cards will have a very large detrimental effect on your credit even if you pay perfectly.
To build up your credit, you need to borrow and pay it back in a timely fashion. It is important that you ask the company offering you credit if they report to all 3 credit bureaus. Often times a lender will pull all 3 credit accounts. They'll throw out the highest and the lowest, taking the middle score as your score. If you buy a lamp that only reports to Equifax it won't help your final score.
One great way to build up your credit with zero risks is to get a credit card - even if you have to get a secured credit card. A secured credit card is where you give the bank $300 (or whatever) and they'll give you a credit card with a $300 limit. Now be cautious. There are a large number of scam banks offering these. Perhaps not actual "scams" but definitely abusive.
Anyway once you get the credit card, set up your electric bill to be automatically paid by the card. Your electric bill is usually the one bill that gets paid no matter what. You may not eat that month, but the electricity stays on. One you set up your credit card to automatically pay the electric bill every month, throw away the card. Shred it. No one, not you, not your brother, not your spouse, no one can use the card. It is gone.
When the credit card bill comes in, pay it in full. You would have paid your electric bill in full. Pay the card in full. If you do this you won't have the card to get into trouble with, you won't spend a single dime more than you would have spent so no problem there. You won't care what interest rate the card charges because you'll be paying it in full.
posted by 2manyusernames at 11:42 AM on June 3, 2013 [4 favorites]
And yes, many of the unethical ones will suggest you dispute everything on the report with the hopes that a creditor or two won't or can't prove the claim. Technically speaking that isn't really legal. You are not allowed to dispute every credit item. Only items that you really believe are inaccurate.
Disputing your credit can even hurt your credit temporarily. Many lenders won't loan at all if you have a substantial number of disputes. They ask that you wait till the dispute is resolved one way or the other.
That being said there are a large number of inaccuracies in credit reports. There are cases of mistaken identity, failure to update a debt has have been paid, etc etc. Correcting those will help but you don't need another company to write a letter.
Something else to keep in mind. If you have a bad debt that is old and hasn't been updated in the last year, you can usually ignore it. If you own Fingerhut $25 from 2009 and the last time they reported it to the credit bureau was 2011 paying them off could hurt you.
If they haven't asked for any money since 2011 they have pretty much given up on it. If you send them their money they will be grateful and will update the bureau that you paid the debt in full. You would thin that would be good. EXCEPT, they'll be updating the bureau. The 2011 debt that no one cared about will be a 2013 debt. Yes, one that has been paid, but your average lender won't care about that. They'll just see it as a current debt instead of an ancient one. Paying off such debts can lower your credit score.
If the derogatory info is correct there is no 'repair' possible other than time. Lenders only care about your recent history. Start paying everything on time. Keep you account balances as low as you can. Revolving accounts should ideally be no more than 50% of your limit. If you have a credit card with a $500 limit keep the balance at $250 or less. Maxing out your cards will have a very large detrimental effect on your credit even if you pay perfectly.
To build up your credit, you need to borrow and pay it back in a timely fashion. It is important that you ask the company offering you credit if they report to all 3 credit bureaus. Often times a lender will pull all 3 credit accounts. They'll throw out the highest and the lowest, taking the middle score as your score. If you buy a lamp that only reports to Equifax it won't help your final score.
One great way to build up your credit with zero risks is to get a credit card - even if you have to get a secured credit card. A secured credit card is where you give the bank $300 (or whatever) and they'll give you a credit card with a $300 limit. Now be cautious. There are a large number of scam banks offering these. Perhaps not actual "scams" but definitely abusive.
Anyway once you get the credit card, set up your electric bill to be automatically paid by the card. Your electric bill is usually the one bill that gets paid no matter what. You may not eat that month, but the electricity stays on. One you set up your credit card to automatically pay the electric bill every month, throw away the card. Shred it. No one, not you, not your brother, not your spouse, no one can use the card. It is gone.
When the credit card bill comes in, pay it in full. You would have paid your electric bill in full. Pay the card in full. If you do this you won't have the card to get into trouble with, you won't spend a single dime more than you would have spent so no problem there. You won't care what interest rate the card charges because you'll be paying it in full.
posted by 2manyusernames at 11:42 AM on June 3, 2013 [4 favorites]
Some are terrifically fraudulent (see this thread on scams.com, or Google ["credit repair" EIN]).
posted by GPF at 11:52 AM on June 3, 2013
posted by GPF at 11:52 AM on June 3, 2013
Response by poster: Suspicions verified. And near-instantly. Thanks, Hive-Mind. Again...
posted by TigerMoth at 11:58 AM on June 3, 2013
posted by TigerMoth at 11:58 AM on June 3, 2013
If there is information on your credit report which is accurate, nobody can remove it.
Sort of.
The answer to the question is no, probably not worth it. Certainly not for the folks these operations prey one, which is customers with a lot of problem entries on their report.
The elaboration on the sort-of is that what is on a credit report is not reality or a legal obligation or necessarily reflective of who may be coming around asking you for money. It is a reflection of what it reported.
Consequently you can have debts that are not indicated. There is no legal obligation to report. A company could decide they're not going to report any status on debts. The money you owe to uncle Albert isn't on there. The obligation for a company is that it is reported accurately.
Consequently there's a process for challenging accuracy. Something on there that doesn't belong to you? You challenge. Says you paid late but you didn't? Challenge. Amount is wrong? Challenge.
When you challenge the accuracy to the credit reporting agency (CRA) they ask the creditor for validation. If they get no response within X period of time (last time I looked into this at all 10y+ ago it was 30 days and I think there was an option for the creditor to request more time) then it has to be removed.
These rebuild operations that claim to remove stuff use this mechanism. Challenge everything and hope you get lucky. Which you may. Because a company went bankrupt or reorganized or something. Or maybe they get fall behind on their processing.
Except the modern reality is they don't, because this is all extremely automated now. At one time companies had a dedicated terminal to interact with the CRA but I wager now it's more integrated. Regardless, it was an open joke in the late 90s that validation requests were a joke. They were rubber stamped. People who were on serious quests would then need to demand proof of validation and documentation of the procedure. It was A Thing. Progress could be made but it might require several steps and potentially even filing suit in small claims court for violating FCRA.
So even 10 years ago this sort of process was known to be horsehockey as well as being something you could do yourself. There was also the issue that sometimes it would sort of work because smaller operations wouldn't respond in time. So you challenge, 30 days go by and the CRA gets no response, so they pull the time. Woohoo! .... till a week later when they got around to responding and it went right back on.
I would be shocked if that happens anymore, unless you're talking about a small non-chain apartment building that does reporting in order to get a little collections leverage. Anything beyond a mom&pop shop is not going to miss deadline on such a trivial thing.
2manyusernames has over-simplified several things in my opinion; the exact best possible ratio for revolving credit utilization has been estimated to be more like 20%, with 0% being worse and 90% being a lot worse. Other factors play as well, such as variety of credit; the build your credit with low usage and auto payment of credit cards will only get you so far. Sometimes old unpaid items don't matter, some lenders (typically at the mortgage level) won't allow you to have any outstanding collections. The exact scoring of FICA is a trade secret but their website has some information on the percentage distribution of factors and plenty of people have created "fake-a" systems to help you game your score.
If you're not looking to buy a home you should avoid worrying much about it. Pay on time, don't re-age old things if not necessary, keep your exposure low and don't gather a huge amount of available credit (re: utilization, above).
Some of my older writing on credit stuff is linked in my profile if you want a mind-numbing level of detail.
posted by phearlez at 12:51 PM on June 3, 2013
Sort of.
The answer to the question is no, probably not worth it. Certainly not for the folks these operations prey one, which is customers with a lot of problem entries on their report.
The elaboration on the sort-of is that what is on a credit report is not reality or a legal obligation or necessarily reflective of who may be coming around asking you for money. It is a reflection of what it reported.
Consequently you can have debts that are not indicated. There is no legal obligation to report. A company could decide they're not going to report any status on debts. The money you owe to uncle Albert isn't on there. The obligation for a company is that it is reported accurately.
Consequently there's a process for challenging accuracy. Something on there that doesn't belong to you? You challenge. Says you paid late but you didn't? Challenge. Amount is wrong? Challenge.
When you challenge the accuracy to the credit reporting agency (CRA) they ask the creditor for validation. If they get no response within X period of time (last time I looked into this at all 10y+ ago it was 30 days and I think there was an option for the creditor to request more time) then it has to be removed.
These rebuild operations that claim to remove stuff use this mechanism. Challenge everything and hope you get lucky. Which you may. Because a company went bankrupt or reorganized or something. Or maybe they get fall behind on their processing.
Except the modern reality is they don't, because this is all extremely automated now. At one time companies had a dedicated terminal to interact with the CRA but I wager now it's more integrated. Regardless, it was an open joke in the late 90s that validation requests were a joke. They were rubber stamped. People who were on serious quests would then need to demand proof of validation and documentation of the procedure. It was A Thing. Progress could be made but it might require several steps and potentially even filing suit in small claims court for violating FCRA.
So even 10 years ago this sort of process was known to be horsehockey as well as being something you could do yourself. There was also the issue that sometimes it would sort of work because smaller operations wouldn't respond in time. So you challenge, 30 days go by and the CRA gets no response, so they pull the time. Woohoo! .... till a week later when they got around to responding and it went right back on.
I would be shocked if that happens anymore, unless you're talking about a small non-chain apartment building that does reporting in order to get a little collections leverage. Anything beyond a mom&pop shop is not going to miss deadline on such a trivial thing.
2manyusernames has over-simplified several things in my opinion; the exact best possible ratio for revolving credit utilization has been estimated to be more like 20%, with 0% being worse and 90% being a lot worse. Other factors play as well, such as variety of credit; the build your credit with low usage and auto payment of credit cards will only get you so far. Sometimes old unpaid items don't matter, some lenders (typically at the mortgage level) won't allow you to have any outstanding collections. The exact scoring of FICA is a trade secret but their website has some information on the percentage distribution of factors and plenty of people have created "fake-a" systems to help you game your score.
If you're not looking to buy a home you should avoid worrying much about it. Pay on time, don't re-age old things if not necessary, keep your exposure low and don't gather a huge amount of available credit (re: utilization, above).
Some of my older writing on credit stuff is linked in my profile if you want a mind-numbing level of detail.
posted by phearlez at 12:51 PM on June 3, 2013
Further advice could be provided if you give more details about what exactly you are trying to achieve.
posted by Dansaman at 2:59 PM on June 3, 2013
posted by Dansaman at 2:59 PM on June 3, 2013
This thread is closed to new comments.
Most of those places will tell you to challenge the information on your credit report. You can do that on your own if you think it's in error, or if it's old and you think they won't have the information to back up their claims.
The 'credit repair' places are great ways to have your identity stolen, especially if it's a sketchy guy who advertises on lawn signs.
Some of them will consolidate your debts and you pay them and they pay your creditors. Don't do that either.
Get a copy of your credit report and see what's on there. After 7 years derogatory stuff has to come off. Make sure everything on your report is accurate.
If you've wrecked your credit, you need to bring everything up to current, and then pay on time going forward. It will take awhile but as you pay down, you score goes up.
But don't bother with a 'credit repair' place.
Google Suze Orman repair credit, I trust her.
posted by Ruthless Bunny at 11:12 AM on June 3, 2013 [1 favorite]