People with bad credit reports often ask themselves either to choose a credit repair companies or do it themselves to improve their credit score. Have you ever wondered about those ads you see from companies and law firms which offer to fix your credit for a low monthly fee? One should first learn the fact of credit repair companies before choosing either to go for a credit repair company or do it yourself.
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“. Also understand some consumers do not have the time, patience (or knowledge) to do the work themselves.
Although some things are better done yourself, only you can determine if doing your own credit raising will be one of them. This is why understanding both the advantages and limitations of a credit repair company and the structure from which it operates are VERY important.
Declaring Contract
The contract between you and the credit repair companies should be easy to understand without an Attorney and spell out the actual services which will be rendered as well as the service providers’ limitations (i.e. they cannot guarantee the removal of any one particular item but can guarantee an overall increase in score overtime).
Monthly Fee
One of the most critical elements which affects “how” a credit restoration 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. Among them are:-
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. 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 credit repair 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 needs (i.e. disputing a late pay, charge-off or judgment etc).
The problem here is that when a credit repair company has thousands of clients they are shooting these form letters out for, the creditors, collection agencies and credit bureaus can take notice of these letters being used over and over and discover your correspondence is coming from a third party (i.e. credit repair company or law firm) and in some cases ignore it or (worse yet) mark the dispute frivolous and flag your credit report.
Credit Repair Companies Never Disclosure Their Methods
95% of large credit repair firms never disclosure their 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 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” they are doing since you are paying for a service. If they won’t, you better run the other way as they could be pouring gas on a blazing camp fire.
Located In Home State:
This is one of the most overlooked keys to successful third party credit restoration which consumers miss. It is absolutely vital when having someone else do your credit restoration work for you that they operate within your home state.
Here’s why:
1. 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 can (and in many cases will) mark the dispute as frivolous and flag your credit file.
2. It is known that many Credit Repair Companies and Law Firms will resort to or create some kind of method to get around this in order to get disputes postmarked from the consumers’ home state (potentially more non-disclosure). For example. If they are in NY and you are in CA they will first have to mail your dispute letters inside an envelope from NY to CA.
Once in CA someone opens the envelope and then mails your dispute letters from CA so they postmarked from your home state. I am not an expert on postal regulations but had a postal employee tell me the concept sounded extremely shady at best.
Unfortunately, with all this hassle and limitation you can preety much conclude that the risk of making more damages to your credit report. You should learn to take matters into your own hands and do it yourself. Rather than paying thousands of dollars and potentially turn out to be the highest paid work you will ever do in your life.
The Credit Secrets Bible is a great source to help you out with the difficult situations you’ll come across while trying to find the right credit repair companies.
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Really Good Info thanks,
I’m in the credit repair business myself and even I learned a bit from this video.
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