The offers are enticing. For a few hundred dollars, or sometimes more, firms offer to erase bad entries from your credit report, credit repair or repair bad credit. But if it were that easy, wouldn't more people be doing it?
Unfortunately, a great many credit repair companies are nothing more than scam operations. They promise to remove every negative entry from your credit report, and then they do something that you could have done yourself at very little cost: they write dispute letters to the credit bureaus. This will only help if those negative entries are inaccurate, incomplete or unverifiable, or if they have been on your report for more than seven years (ten years for bankruptcy).
Some credit repair firms also advise their clients to do things that are illegal, such as attempting to create a new identity. They instruct clients to apply for an Employer Identification Number (EIN) or a new Social Security Number, alter their names and addresses, and apply for credit using this information. This could subject you to both criminal and civil fraud charges.
Not every credit repair firm is bad, though. There are many that operate within the law. They help clients dispute only items that are erroneous, and use legal tactics to persuade the credit bureaus or the creditors themselves to remove those items. It is important to remember, however, that any consumer can write the required letters himself instead of paying someone else to do it.
What to Look For
When considering a credit repair firm, there are several things to consider. Those that are out to take your money usually bear a few red flags. These include:
* They guarantee to remove all negative entries from your credit report. No one can legally remove legitimate entries.
* They discourage you from contacting the credit bureaus or your creditors on your own. Often they are afraid that if you do so, you'll realize that you could remove the same things yourself that they want you to pay them to remove.
* They advise you to use illegal tactics to improve your credit. If you're in doubt about something they ask you to do, ask questions. If you're not satisfied with the answers, speak to a lawyer about it.
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