Using A Credit Repair
Company
Facts You Should Know
First
Have you
ever wondered about those
ads you see from companies and law firms which offer to fix
your bad credit score for a low monthly fee? People with credit
problems often ask me when it comes to improving their credit
score whether they should hire a credit repair company or do it
themselves. Unfortunately, there is no simple or universal
answer to this question.
Companies offering to restore your bad credit rating to a good
one have popped up like mushrooms after a rain. The
problem is that most of them aren't very good, or are outright
frauds. As a matter of fact, the reputation of these
companies, as a class, is so bad that some Better Business
Bureau chapters won't even accept a credit restoration company
as a member.
There are some good ones, but finding them isn't easy, and the
good ones aren't cheap.
Furthermore, according to the Federal Trade Commission
(FTC) “Everything a credit repair clinic can do for you
legally you can do for yourself at little or no cost”. While
I agree with the FTC, I also understand some consumers do
not have the time, patience (or knowledge) to do the work
themselves and the thought of
“we-do-it-all-for-you-credit-repair” becomes very
appealing.
Here are some ideas about finding and evaluating the better
companies:
REFERENCES: Any legitimate company or
individual doing credit repair work for consumers will be able
to provide you with at least half a dozen references. If the
company or person is local, you should be able to call these
references. This is without question the most important point
of consideration when hiring a professional to do the work for
you.
If possible, I suggest you ask friends, family, relatives and
professional contacts if they know of someone who does credit
repair work as a side business. By far the highest percentage
of successful stories I hear from consumers are those which
come from those who found a credit consultant via personal
referral. I cannot stress this enough.
CONTRACT: Unlike painting a house or putting
in a driveway, credit restoration work (and results) are
extremely broad. Therefore, the use of a contract is
imperative. Most likely your credit challenges didn’t occur
overnight and they won’t be improved overnight either. A good
contract protects you as well as the service provider. The
contract should be easy to understand without an Attorney and
should spell out the actual services which will be rendered as
well as the service providers’ limitations. As an
example, they cannot guarantee the removal of any one
particular item or the removal of all bad credit references,
but can guarantee an overall increase in score over time.
MONTHLY FEE: One of the most critical elements
which affects how a credit repair company operates is
determined by its payment structure. One of the most common
payment structures of large companies or law firms doing credit
restoration is that of the monthly “auto-debit” fee. In this
structure, the consumer usually pays $49 to $99 up front and
then a monthly fee of $39 to $49 per month. While there is an
advantage to this method (affordability) with it comes many
disadvantages.
1.) The first disadvantage this structure creates is that it
gives the company absolutely no incentive to work quickly or
aggressively on behalf of the consumer. In fact, the opposite
is true. The longer they take the longer they will continue to
collect their monthly fee! In most cases, this structure leads
to slow results over a very long period of time. Looking at it
logically, this shouldn’t come as a surprise.
2.) The other challenge within this structure is the actual
amount of time, effort and resources which a company or law
firm can reasonably allocate on a consumer’s behalf. Remember,
any large business has a tremendous amount of overhead which
quickly chews up most of that monthly fee. Out of that $39 to
$49 there are monthly expenses including but not limited to:
Advertising, Office Rent and Utilities, Employee Payroll and
Taxes, Health Insurance, Phone Service, Office Supplies,
Refunds, Computer Maintenance and Programming, Website
Administration, Office Supplies and let’s not forget postage
for mailing letters to creditors, collection agencies and
credit bureaus. A much simpler way to think of this is by
imagining if you had a client paying you $39 a month; how much
work would you be willing to do?
3.) One of the biggest challenges those companies charging low
monthly fees run into is being forced to rely on the use of
automated “Boiler Plate” Dispute and Correspondence Letters.
Boiler Plate Letters are simple form letters which are used for
ALL consumers (one format fits all). Once set up in a computer
program with the consumers’ information they are “shot out”
automatically on behalf of the consumers to dispute any
particular item of bad credit, such as a late pay, charge-off
or judgment etc.
The problem here is that the creditors, credit bureaus and
collection agencies have long since taken note of these form
letters, the realize that they are being sent by a third party,
and to a large extent they simply ignore them or respond that
they consider the form or letter frivolous and that they will
take no action.
NON-DISCLOSURE OF METHODS: One of the most
troubling issues with 95% of large credit repair firms
(especially law firms) is their non-disclosure of dispute
tactics and methods. As a consumer, it is vital that you are
made aware of the methods they are using in dealing with your
creditors, collections and the credit bureaus. If the
organization or law firm violates laws or makes errors, (I have
witnessed both) you could be held liable for their negligence.
In addition, this can actually make your credit worse and
create problems which are very difficult to clean up. Anyone
doing credit restoration for you should disclose what he or she
is doing since you are paying for a service. If he won’t, you
better had better run the other way, as he could be making
things worse for you.
LOCATED IN HOME STATE: This is one of the most
overlooked keys to successful third party credit
restoration. It is absolutely vital when having a firm do
your credit repair work for you that it operates within your
home state. Here’s why: if a credit repair company or law firm
mails dispute letters or correspondence on your behalf from
another state, that mail will be postmarked from that state. If
the credit bureau catches this, they are likely to mark the
dispute as frivolous and flag your credit file.
CUSTOMIZATION: It’s for this reason that some
of the most advanced forms of credit restoration are done
completely customized for the client and even (in many cases)
by hand. The best credit restoration companies I’ve seen are
usually run by one person or a small number of people and are
extremely customized for each client. The is the most
effective, but with effectiveness comes cost. Every one of
these services I have seen charges a very large upfront fee and
works entirely off referrals. This type of service is simply
impossible to perform for $39 or even $49 a month.
The bottom line is that unless you can find one of these small,
highly-recommended firms in your area (preferably an
individual) by way of referral through a friend, relative or
professional contact, then I recommend that you take matters
into your own hands and do it yourself. I realize most
consumers do not want to hear this but the good news is that it
will almost always turn out to be the highest paid work you
will ever do in your life. How high? How does $500 to $2500 an
hour sound?
Here's an example: When you go to finance a home, the
difference between good credit and bad credit will have a large
effect on your interest rate. If you secure a $200,000
mortgage for a 30 year term and your interest rate is 2% lower
because you have a high credit score, that 2% will save you
$96,934.11 over the course of the loan. Take that $96,934.11
and divide it by the 30 to 50 hours you may spend working on
your credit situation and you’ll quickly realize credit
restoration when done properly does not cost - it pays!
Given enough time, and good research skills, and high tolerance
for wading through a lot of legal mumbo-jumbo, you probably
could figure this all out on your own. Remember, though,
a bad credit report can negatively affect many aspects of your
financial life. With something this important, it makes sense
to get help-- and it will save you a lot of time. The
sooner you get the credit repair process going, the
better. So yes, do it yourself, and save hundreds or
thousands of dollars, but do it with our insider knowledge and
expert help. Our "Credit Secrets
Bible", in print for fourteen years and constantly revised,
will teach you everything you need to know to transform your
bad credit profile into a good one.
CreditRepairForBadCredit.com is a project
of Wealth Instead, LLC. The company was founded as a vehicle to
market an Internet-based debt reduction system, although over
time we have started to see it in broader terms around the idea
of credit, debt, and wealth in general.
Source: http://www.CreditRepairForBadCredit.com/Before-Considering-Credit-Counseling.html
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