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credit repair

Does Credit Repair Work?

John, I’ve got really bad credit. Some of it is my fault and some of it is my ex-husband’s fault. A friend of mine said I should pay for a credit repair company to get stuff off my credit files. Is that legal? Do they work?

Answer, If you listened to the credit reporting agencies and the Federal Trade Commission then you’d conclude that credit repair is a scam. In fact, I used share their opinion because I came from the industry and you get a little brainwashed. However, now that I’ve had a chance to see first hand just how poor of a job the credit bureaus do of maintaining fully correct data, my opinion has softened a bit. I still think some of them are dirt bags but to say the entire industry is a scam is an exaggeration.

Credit repair, despite some rumors, is not illegal. There are Federal and state laws that govern how credit repair organizations must operate in order to NOT be acting illegally. CROA (Credit Repair Organizations Act) is the big one. If the company is complying with CROA (you can look it up and review it, it’s not complicated) then that’s the first step to choosing a credit repair company. Also, if they guarantee they can have items removed or try to take money up front for their services, RUN! That’s illegal under CROA.

We know at least one of the credit bureaus sells credit reports to credit repair organizations so they’re being a little hypocritical calling the entire industry a scam. And I know that many of them are successful getting items removed from credit reports. If you believe what you see on the Internet then some of them have gotten millions of items removed over the years. And, even the FTC’s own annual compiling of complaints shows that credit repair generates a very small number as compared to ID theft, debt collectors, and yes, the credit bureaus.

I hope this has helped. As with any service provider, there are good ones and there are bad ones. Do your due diligence before signing up with anyone. Ask for complaints, ask for success metrics, ask for costs, and maybe even ask for references. Don’t worry about BBB ratings. Those have proven to be less about reality and more about coercing payment from companies who want a higher rating.

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