Saturday, October 30, 2010

Credit Repair Scams

You can't " repair"  a bad credit report or increase your credit score by paying someone to fix it for you.  If there is erroneous data on your report, you can have that corrected, for free, yourself.  By the way, a 720 credit score is nothing to write home about.

People obsess about their credit scores, because the television tells them to.  You are not your credit score, just as you are not your debt.  Get out of the mindset that your credit score is the end-all to humanity and an indicia of your wealth.  Stop borrowing, get out of debt, and your credit score will improve - and you won't care, because you won't need it.

There are a number of scam companies out there they claim they can "repair" your credit score or your credit report by removing items ranging from bad debt, to bankruptcy, to delinquent payments.  Here's a clue - if the bad reports are accurate and true, it can't be done, period.

They usually take an up-front fee of $150 or so and then do....nothing.  That's the scam - they take $150 from a lot of people and make a lot of money.  Not a real difficult scam to pull off, either! 

As I noted in  Your Really Free Credit Report, you can go to and order all three of your credit reports.  You can't get your "score" this way, but it gives you access to the more important underlying data from which the score is based.  Note:  Use the link and not the one advertised heavily on the TV and internet -the so-called "free" credit report is NOT free!

And yes, inaccurate data can appear on your report.  It happens.  But you don't need to pay someone to fix it.  And in fact, these people who claim to fix credit reports rarely, if ever, do.

For example, as I noted before, I had a mortgage that was sold to Key Bank two decades ago.  I had just signed up for automatic payment deduction from my checking account, and they deducted that month's payment.  But it was not forwarded to the new bank for a month, so they showed me as being delinquent on a mortgage payment by a month.  Ouch!

Late mortgage payments are a number one cause of low credit scores.  How to fix this?  I called the bank in question, talked to a representative on the phone, they reviewed the account, and they agreed the report was in error and agreed to correct it.  Total cost:  ten minutes on the phone.

By the way, another bank has told me that since those days, most banks do not report mortgages as delinquent after purchasing them, for at least the first month or so.  They know that payments can get "lost" between lenders and that reporting a mortgage late is a good way to get sued.

Another example was not as apparent.  I looked at my report and it showed me as "over limit" on a credit card, despite the fact the card was no where near its limit.  The problem, again, was that the credit card company reported my limit as $0, which happens sometimes due to computer error or if no one enters the proper amount.  So any charge was "over the limit" and it dinged my credit report and score.

Again, a simple call to the card company and the problem was solved.  Not only do you not need to pay a "credit repair agency" to do this, they simply would not have caught this, even if they did do something, which they usually don't.

Other small dings on your credit report might be taken off if you call a creditor and make nice.  For example, I had a Sears card that was showing one payment overdue.  Now if you wait long enough, this data "falls off" your report.  But a simple call to the Sears card people was enough for them to take the data off the report, as I had been paying regularly on the card and had a zero balance.  They don't want to be the ones who prevented you from getting a home mortgage - its bad for business.

Miscellaneous Data should also be reviewed, including addresses, spelling of names, and the like.  I found that my name was entered in several different formats, and an address I never lived at was in there as well.  The credit reporting agencies usually have links on their sites to submit such corrections, and when I went back a few months later, the data had been updated.

Big Credit Problems are impossible to take off a credit report, however.  Despite what the "credit repair" agencies, say, you can't just have a bankruptcy wiped off your report, at least for several years.  Ditto for uncollected debts, judgments, and chronic late payments.  The "Credit Repair Agencies" are just doing the oldest gag in the book - telling you what you want to hear - that there is a Santa Claus and you can get something-for-nothing and you can be a deadbeat and have an 850 credit score.

But life doesn't work that way.  If you don't pay your bills, you are a high credit risk, and your credit report reflects that.  And debtors are not going to spontaneously remove negative credit information from your report just because you paid someone some money.

And by-the-way, it doesn't matter if you have a "perfect" credit score - no bank will loan you money if you don't have the verifiable income to pay the loan back - or at least they shouldn't, and you shouldn't accept such a loan.   A loan you can't pay back is a one-way ticket to bankruptcy.

A better approach is to use that $150 to pay down debt and make a plan to get out of debt and get "clean" and stay that way.  It may take years to do this, but it is totally worthwhile.  And by the time you do that, your credit report will be much improved - and you won't need it, as you will have gone to an all-cash lifestyle.

Chasing the credit score is a false religion - one that is taught by the TeeVee.  Get off the debt bandwagon and stop viewing wealth in terms of how much you can borrow.