Credit repair, credit doctor, credit makeover, credit restoration, call it what you will, in most cases I would call it a scam and in disfavor to the general public. I have read the printed material, looked at hundreds of web sites and been pitched by several unapprised sales people. My personal conclusion of their service: about 90% scam/10% legit.

I don’t have a problem with any company offering a viable service, charging a reasonable fee and fulfilling their obligation, which is how a great number of us make a living.

However I do have a problem with the companies that make claim that they can:

Pitch: Perform tasks that get successful results and no one else has the ability to achieve this level of success, just us!

Fact: The consumer has the right to have any inaccurate information disputed and corrected by each of the three primary Credit Reporting Agencies (CRA’S). Mortgage companies use credit-servicing companies that have direct access to the three main CRA’s. If your client has the correct documents to prove the inaccurate information, the servicing agency can usually have the items corrected. The CRA’S do charge a small fee for this service.

Pitch: We only charge $695 for one person and a couple is only $1295! “Please pay the entire amount up front, as soon as possible, in cash, we do not accept checks”.

Fact: The Fair Credit Act (FCA) plainly states that the fees cannot be collected prior to the service, but only after the service is performed and is complete. Besides the consumer can accomplish the same task for the cost of an envelope and a stamp. A template of a standard dispute letter is available for free on line from the Federal Trade Commission (FTC).

Pitch: Our method is to overwhelm the Credit Reporting Agencies (CRA’S) with mail and unfounded claims of error on their part. If they don’t investigate and validate each and every one of the claims within a 30-day period the CRA’S will have to remove each of the disputed the items from their data base and the information will never show on the credit report.

Fact: Dishonest submissions are illegal, so take my advice and do not let your client take part in this kind of tactic. Overwhelming the CRA’s with mail will delay and probably clog the system. This may or may not result in the removal of the item. However, what most of the repair shops do tell the consumer is that the CRA’S have no time limits when it comes to checking the soundness of the claim. If they found the claim to be frivolous or fraudulent next year, they have the right by law to return all of the information removed right back to the report.

Pitch: (This is the most recent that I have come across.) We have found a loophole in the FCA and the CRA system that will allow us to remove a reported Bankruptcy and any other derogatory information. We can do this by making the CRA’S prove the accuracy of the report with original, signed documentation that they have in their custody.

Fact: Well this one is new to me and I do not know if there is any credibility to their claim. It is quite apparent that this is an impossible task for any CRA. If by some chance there is a way to achieve success in their process, we all are going to have a problem. If we do not know what a persons credit background is, how they pay, if they have ever filed bankruptcy or had a foreclosure, then the lending system will break down completely.

It is my opinion that the claims made by these companies are not the biggest problem facing the consumer and the lending industry. Almost every ad, sales pitch, web site or promo piece that has been created by the credit repair companies generally links the mortgage industry to their business. The most serious problem occurs when any individual from the lending industry refers their customer to some self-proclaimed credit repair genie, thus giving them credibility. Referring a client to them is like dropping chum over the side of the boat to attract sharks. Your client is already bleeding, and so don’t be responsible for pushing them over the side.

If you are a Mortgage Broker/Lender, teach your loan officers how to handle disputed items on a clients credit report. If you don't know how, learn. If you are a loan officer, ask your Broker how you can help your client handle the matter. You should also go to the web sites of the Federal Trade Commission and read the Fair Credit Act and then visit all three of the Credit Reporting Agencies sites (Experian, Equifax, Transunion). Read the educational material that they offer for free and become educated in credit issues.

Correcting mistakes on your clients credit report may take some time, but it may save your client thousands of dollars in interest charges and fees to a credit repair rip-off.

Read the rules, remember them, and teach them when you can. If you are approached by a salesperson, or see a web site promoting credit repair and if they are in violation of the Fair Credit Act, report them to the FTC. Many of the companies will collect hundreds of thousands in fees before they get caught. Then they will only have to pay a fine and stop what they are doing.

The credit reporting industry has a lot of problems and they are the first to admit it. The size of the system and the volume of business will boggle the average mind. Fair Isaac and Company (FICO), the brains behind the credit-scoring model, reports on their web site that their creation now makes about 793 decisions every second of every day and over 25 billion decisions annually. Volume has doubled with the advent of the Internet and instant access by consumers to the credit system.

The Internet also offers many companies as well as individuals the opportunity to create an illusion that they are a major player in credit and credit repair via high tech web sites. On a more positive note, the Internet has become the single most important information source on earth. If you want to find info about any subject, like credit and credit repair, all you have to do is fill in the blank and hit the search button.

My point: Anyone in the credit or lending business has all of this information at his or her fingertips. So there is no excuse for not having a general working knowledge about credit reporting, credit law and how anyone can correct erroneous information.

Like our criminal justice system and our electoral college, the credit system may have its problems and you may not like it. However it is the best system on the planet and for the better part, it still works.

You will find the complete Fair Credit Act on line at http://www.ftc.gov/os/statutes/fcra.htm

A detailed FTC summary of the Federal Credit Act is located on line at

http://www.ftc.gov/bcp/conline/edcams/fcra/summary.htm.

PS: If you find a company that charges a fair fee, educates the consumer, gets paid when the work is done, can successfully correct a credit report and can do it in a timely manner, please let me know. I have this Cap 1 card that keeps haunting me, oh well, that’s another story….


Article submitted by Kerry G. Wright Sr. Kerry is a Senior Loan Officer with Real Estate Mortgage Service in Olive Branch Mississippi, and can be reached at kerrywright@usa.com

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