Credit repair not the best way to get a refinance

Listen in on a call to a credit repair firm:

"Hi, I'm calling about getting my credit history repaired. Is it true you can do that?"

"It's true. Our firm can legally improve your credit score no matter how low it is."

"I'm way behind on my bills. My credit is a mess."

"It doesn't matter! There are legal ways to remove those lines from your credit report. Even tax liens and judgments can be removed and you won't have to pay them."

"C'mon, what do you do, blow up the County Clerk's office?"

"We use the Fair Credit Reporting Act, which was enacted to protect your rights. The credit bureaus must remove negative information from your credit report."


"Yes, because the law says information on your credit report must be accurate and verifiable or the bureaus have to delete it. But it's very difficult for a creditor to verify disputed items. So, if you know how to force credit bureaus into a verification process, you can likely get the negative information permanently removed. Our proprietary system works to challenge practically anything on a credit report, and it's highly effective. It's fast and saves you a lot of money.

"How well does it work, exactly?"

"I would say 95 percent of the information we dispute goes away."

"But what's all this going to cost?"

"It's a thousand dollars. You put two-fifty down, then you can pay the rest over six months. Or you can pay nine hundred today and save a hundred bucks."

"Wow, that's a lot of money!"

"Compared to being shut out of mortgage refinancing for ten years, or being unable to get the best interest rates, it's not much."

Debt relief reality

Can these guys really get you out of paying your debts and restore your credit rating too? They promise you that they can repair your credit rating -- for a big upfront fee -- and claim they have some special expertise or system they can use to delete negative information from your credit reports -- even if it's true.

The truth is no company can substantially improve credit histories by permanently removing bankruptcies, charge-offs, late payments, and other negative items. Unless you have an identity theft issue, a lot of obsolete debt from years ago, or inaccuracies such as accounts discharged in a bankruptcy still showing up as past due, you won't get much help from these guys. And even then, they don't do anything you can't do for yourself.

Although there are legitimate, not-for-profit credit counseling and debt management services, the Federal Trade Commission (FTC) claims on its website that it has never come across a legitimate credit repair company. There are no loopholes, and no slick "systems" that can erase negative credit information if it is accurate and current.

Federal law allows credit bureaus to report all truthful information, including negative items for seven years (bankruptcies can be reported for 10 years), and the credit repair operators cannot and do not get this information removed. Why else would they want to be paid upfront unless it's because they know they can't perform?

Everything a legitimate credit clinic can do for you, you can do for yourself and save your money. You are entitled to a free copy of your credit report once a year; get it at annualcreditreport.com.

You can dispute mistakes or outdated items for free. To do this, you contact the bureau that reported the inaccurate information:

  • Equifax - www.investigate.equifax.com
  • Experian - www.experian.com
  • TransUnion - www.transunion.com

If you decide to respond to a credit repair offer, beware of companies that engage in any of these suspicious practices:

  • Making you pay upfront for any service. Under the Credit Repair Organizations Act, companies cannot require you to pay until they have completed the promised services.
  • Concealing information by not informing you of your rights, or that you can correct errors yourself for free.
  • Keeping you out of the loop by telling you not to contact the bureaus or creditors directly.
  • Urging you to obtain a new credit identity or an Employer Identification number (EIN).
  • Giving you a hard sell for a mortgage refinance, debt consolidation loan, or home equity line of credit.

Bad credit can keep you from getting the lowest mortgage refinancing rates, but credit repair services are not the way to improve the picture. Take care of inaccuracies yourself, pay your debts and check your credit every 6 months. You'll see progress, without wasting your money on bogus debt relief.