Credit Repair Services You Should Never Pay For
Maybe you’ve heard from them—companies that claim to be able to reduce or eliminate your debt faster than you ever could on your own. They might claim to be able to eliminate your bankruptcy, raise your credit score, or negotiate reduced interest rates with your lender based on their special relationship with that lender. These companies are rarely legit, however, and it can be very difficult to get a refund once you’ve spent hundreds of thousands of dollars and still have as much debt as you did before.
Here are a few things credit repair services will try to make you pay for—that you can do for yourself just as effectively.
Getting a copy of your credit report
Some credit repair companies will offer to get you a copy of your credit report—for a fee. You should never pay for a copy of your report. Federal law states that everyone has a right to one free credit report from each of the major credit reporting companies—TransUnion, Equifax, and Experion once a year.
You are also entitled to get a free credit report at any point—even if you’ve already received your free credit report for the year already—if a company decides to take “adverse action” against you by, for example, denying you credit, insurance, or even a job based on your credit score. You’ll receive the notice of action in the mail, and you have to request the credit report within 60 days of its arrival.
Other instances when you are entitled to a free credit report include if you are unemployed, on welfare, or dealing with identity theft problems.
Removing incorrect information from your credit record
Some companies will ask you to pay them to do this. But it’s something you can do yourself, for free. You can do this by getting copies of your credit reports for free from the three major credit reporting agencies and reviewing them. The three credit reporting companies often focus on different things and have different information on their reports, so it is advisable to try all three. If you find an error, send a letter of dispute to the company.
Negotiating with your lender
Many fraudulent credit repair companies claim that they have special connections with companies that issue credit cards. They tell prospects they can negotiate special insurance rates based on their relationships. The promise may come with a money-back guarantee, or they may claim the offer is limited-time only.
The FTC says that no credit repair company has a relationship with credit card issuers so special that it can negotiate lower rates. Borrowers themselves have just as much influence with their lenders to negotiate reduced rates—and they are no less likely than you are to get denied a rate reduction. According to the FTC, credit repair companies do not achieve good results in this area—and don’t wind up saving more than people who negotiate themselves.
The FTC now requires credit repair companies not to charge customers until after their services have been provided—so if a credit repair company is asking for money up front, it’s almost certainly a scam. Also, many of the “services” they offer are in fact illegal—such as scrubbing your credit report of negative but true information.
There are reputable credit repair companies out there—but these are not the majority. Do your research carefully, and watch out for any that use suspicious marketing tactics or make promises that sound too good to be true. No credit repair company can erase your negative credit history or persuade your lenders to drop student loans from a traditional or accredited online school. Be savvy and aware, and hopefully you’ll be able to find a solution to reduce your debt—without getting scammed.
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