Worse Than Banks?
It’s no secret that the days of trusting banks, churches and judges implicitly are forever gone. With banks having had to pay huge fines for blatant misconduct including fraud, it’s pretty clear that you can no longer afford to turn your back on a financial service provider.
So when other financial companies start expressing concern about how one related industry is behaving, it’s really time to worry. That industry is called “credit repair”. While a large part of it is legitimate, a few truly shady operators have managed to put the whole category in a bad light.
Few people can afford to live on a cash-only basis (ironically, these presumably rich individuals might have very bad credit, having no history).
Myth 1: Bad Credit is a Result of Irresponsibility
Of course it frequently is, but, as often as not, other factors play a bigger role. Deceptive financial marketing, such as describing a mortgaged house as an “asset”, or implying that debt repayments will be much lower than actually turn out to be the case, has put many well-meaning people on the blacklist. Banks and their agents will tend to defend themselves by saying “it was in the contract”, but given the page count and complexity of these contracts, this is disingenuous. Most non-bankers tend not to be financial specialists, trust(ed) their bank’s honesty or could not afford a lawyer, and were later punished for these attributes.
Unexpected financial setbacks can also ruin a decent taxpayer’s financial reputation. Medical bills come to mind, or being caught out under-insured when a minor disaster strikes. A debt or tort disputed in court might affect your credit rating, whether you are in the wrong or not.
The way banks handle identity theft has caused lifelong problems for many people. When your credit is suddenly ruined by an unpaid $50,000 loan in your name, which you never saw a penny of, the bank will typically declare that it had to be all your fault, and that they expect payment promptly. This is despite their own systems being demonstrably vulnerable to fraud.
Finally, the algorithm for calculating a credit score is poorly understood by most people. For instance, when you apply for a credit card, the issuing company will look at your rating in order to decide. But when you are approved or declined, this influences that same credit rating! Many otherwise responsible practices can actually hurt your rating, just because of the way it is calculated.
Myth 2: The guy who Promises the Most, Knows the Most
Lies, damned lies and advertising: if you see a phrase like “100% guaranteed!” take a moment to ask why the tautology and exclamation mark is necessary. If the company has a television advert featuring girls in bikinis and actors dressed like animals, alarm bells should be ringing.
If, on the other hand, you find an adviser working out of a small storefront office with a few framed diplomas on the wall, who starts out by talking about your problems instead of how great he is and how much he can do for you, you are very likely dealing with a professional who’s more interested in doing his work than attracting new customers.
Myth 3: Credit Ratings are Inflexible and Infallible
Actually, no. Mistakes do happen, and you can contest them; the same thing is true of credit card statements. Everybody should check their credit reports once a year. If you notice an item from some company you’ve never heard of in your life, you can and should query it. To err is human: I know one guy (not in the US) who was threatened with bankruptcy and possible jail time by the tax collector, which bewildered him completely. It was only on his first court appearance that the mistake became clear: same name, different social security number than the person they were after.
Myth 4: There’s a Secret Shortcut
If you’ve defaulted on a debt, only time (7 – 10 years) will remove that information from your record. Any legitimate credit repair company will be upfront about this fact, but that doesn’t mean there aren’t many other things they can assist you with. Helping you to restructure debt, advising you on which creditors to pay first for best results and so forth, will improve your credit score substantially if not immediately.
Myth 5: They all Fly by Night
Fueled by the bubble, the effects of which are still being felt, credit repair agencies sprang up like toadstools in the night. Some will just take your money, after which they’ll send you a weekly packet of generic excuses about why nothing is being done. However, there are also many respectable operators who will be clear about what is and is not possible (legally), how long you can expect it to take, and what will be required of you.
The Credit Repair Organizations Act (“CROA”) regulates this industry, and although many operators don’t pay much attention to it, many others are completely scrupulous in following the rules. Remember that, however bad your credit may be, you still have rights, and should insist on them.
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