Should You Use A Credit Repair Agency?

You see their ads on TV: credit repair companies claiming the ability to expunge your credit report. No wonder people pay big bucks for a “do over” of their credit because your credit score really matters – it’s a numbers game and the higher the credit score, the better. Why wouldn’t you respond to an ad touting a money-back guarantee to remove your “dirty little credit secrets” such as bankruptcy, judgments and tax liens?

First, there are no loopholes in the federal law allowing for a negative credit history to disappear. You can, however, challenge anything in your report, and if the credit bureaus don’t complete their investigation within 30 days, the disputed item(s) must be removed. 
 
So, how does a credit repair agency work its “magic?” Basically, it bombards the credit bureaus with letters, arguing that none of your negative account history is valid. But after the credit bureaus validate the accounts and debts, the items will reappear on your report and your score will plummet again. 

There are legitimate companies that can assist you in disputes. But there’s nothing they can do that you can’t do yourself for much less money. Companies can charge you hundreds or even thousands of dollars, or you can order a consolidated credit report for 30 dollars and get to work. 
 
If you choose to delegate to the professionals, watch out for red flags. Be wary of companies that guarantee results, as the Credit Repair Organizations Act specifically forbids such claims. Removal of any items ultimately depends on the credit bureaus and the creditor who reported them.

Watch out for companies that try to charge you before performing any services. According to the Credit Repair Organizations Act, credit repair companies can only charge you fees upon completion of agreed upon services. Some may charge you up front with a money back guarantee, but you will be out of luck if they go out of business before completing the work. 
 
Stay away from a company that offers to help you create a “new” credit identity.  This practice, known as file segregation, is a federal and state felony.

Do your homework. Contact the Better Business Bureau to see if the firm has had any consumer complaints.

Ask questions. By law, your bankruptcy stays on your report for 10 years. So exactly what black magic would the agency have to practice to make it disappear? If by some miracle they accomplish this, do you go around pretending and claiming that you never filed a bankruptcy because it no longer shows in your report?

Remember that credit repair companies cannot remove accurate records of bankruptcies, judgments, liens or bad loans from your file unless the credit bureaus fail to respond to your dispute within 30 days. 

You can also dispute entries online through annualcreditreport.com, but be aware that bureaus have up to 45 days (instead of 30 days) to investigate your dispute.

The bottom line is no company can perform miracles, and there are no quick fixes. You know your credit report best. If you have the time and tenacity to regularly comb through your report and contact the credit bureaus with disputes, then you can maintain an accurate credit rating.