First off, if something is being marketed through the lowest forms of hucksterism-e.g., spam in your e-mail box or low budget late night television commercials-you probably should already be fleeing as fast as you can. And certainly that’s the case with the bulk of the supposed “credit repair” outfits that promise to fix your bad credit. Let’s look at some of the specific methods these places will use or propose to use on your behalf (for a hefty, not always clearly disclosed, fee):
1. Provide you with a copy of your current credit report.
Depending on your state law and how recently you’ve requested a copy, you likely are legally entitled to obtain your current credit report for free yourself. Even if you can’t get it directly yourself for free, some other (legitimate or borderline legitimate) credit-related businesses will pull it for you for free in the hopes you’ll use their paid services down the road (which of course you don’t have to).
2. Correct errors on your credit report, like if there’s a charge that isn’t yours, or something hasn’t dropped off that should have after this many years.
Any of that you can do yourself by communicating directly with the credit bureau (Equifax, Experian, and Trans Union are the main ones) that issues the report. You even are allowed to provide them with a note of explanation or mitigation about one of your charges, which they will include in your report in the future. It really doesn’t help you to have a middleman do these things, unless you just absolutely don’t want to deal with them.
3. Have damaging items that are not in error removed from your report by using their back channel contacts with people who work for the credit bureaus.
This is the equivalent of the big shot who has, or claims to have, the kind of clout to get your traffic tickets “taken care of.” Or the tout who sent around an e-mail years ago telling a “select few” people that they really needed to buy his football picks for the upcoming season, because he had “inside information” about a referee who could be bought to determine the outcome of certain games.
Besides being dishonest (if the items aren’t in error, why should you be able to get them removed from your credit report in the first place?) and implying some kind of bribery or fraud, they’re making it up anyway. They don’t have any such “secret contacts” that will do them favors.
4. Have damaging items that are not in error removed from your report by harassing the bureaus with endless challenges and paperwork and minutiae to keep them in dispute.
Again there’s the issue of this being a dishonest approach even if it worked.
Not that what a lot of lawyers do for wealthy and corporate clients isn’t on a comparable morally unscrupulous level of intentionally gumming up the system to make it work less efficiently, but this happens not to be an area where tactics like that work very well, especially as carried out by the kind of people marketing to folks who can’t pay their bills.
Such efforts on your behalf will typically either have no effect whatsoever, or will cause an item to be temporarily moved into a kind of “pending” category while being investigated, and then put right back on your report shortly after that.
5. Enable you to start your credit history from scratch with a new Employer Identification Number.
Well, it’s dishonest (sense a theme developing here?), and could get you in trouble for fraud.
Not to mention, it doesn’t work. Your new report will have all or most of the same information anyway, since you’re listed under the same name and address and such.
Unless you’re also going to change your identity with a whole new name and other information (in other words, go even farther down the fraud path)….
6. Obtain a mortgage or other new loan for you that you can use to pay off your existing debts to improve your credit report.
If you’re going to these people because your credit is bad and you can’t pay your bills, what kind of loan terms do you really expect to get from them? (Hint: Lefty who hangs out down at the pool hall and charges interest by the week is probably a better option for you.)
Also, as far as obtaining an additional mortgage, while there’s no blanket rule that says it’s always unwise to pull money out of your house to solve other financial woes, you want to be very, very wary of that. It’s almost always best to do whatever you can to keep your mortgage at a payable level for you, even if that means other bills go unpaid.
If you get behind on credit cards and other bills, yes, that’s bad, and it messes up your credit. But if you can’t pay your mortgage, you can lose your house.
In other words, don’t rob Peter to pay Paul when it’s Peter you really need to stay on good terms with.
In conclusion, occasionally you can obtain some small benefit from a credit repair business, if they write some letters for you and do the necessary follow up to correct something that is erroneous or at least in a gray area on your credit report. But almost always you would have been better off doing that yourself, or going through nonprofit groups or government agencies that exist to assist consumers. And if it really is something complicated that maybe needs someone with more expertise in these matters, you’d generally be better off spending the money on a conventional attorney or accountant trained in these matters than trusting this kind of outfit.