For the last 5 or 6 years I’ve been telling friends and family how ugly of an industry credit repair and debt settlement is getting to be. I’ve also said that sooner or later the FTC would shake out the bad apples making it a safe place for consumers again.
It looks like my prediction was wrong. It’s gotten worse…much worse. And faster than I thought, too.
Regulatory bodies have cracked down as much as they can, but so far their efforts have been in vain. With the current economy, the housing market collapse and bankruptcies soaring, it’s just too much temptation for the scam artists of the world to resist.
To make matters worse, it’s not just the typical opportunists popping up to ride the wave of opportunity. Some of the larger firms have tried to grow so fast that they’ve thrown away the true value in their services and turned themselves into worthless chop shops in order to make a quick dollar.
The fast buck money makers aren’t what scare me so much though. Typically with any amount of common sense they’re not too hard for the consumer to spot. It’s the larger firms with churn and burn tactics that scare me and here’s why.
A few years ago there weren’t too many real credit repair companies out there. The legitimate ones were actually able to do a good job. Thus, they racked up some nice testimonials, affiliations and word of mouth.
However, in an effort to grow too fast and capitalize on this poor economy, some of them have thrown value and results out the window and replaced it with overseas outsourcing, dispute templates and poor service – yet still hide behind the accolades they earned years ago when they actually provided a real service.
Here is what I’d look for in any credit repair company, despite their past record.
Warning Sign 1) Horrible Reputation:
In my opinion there is no excuse for a BBB complaint (perhaps one or two) in this industry and here’s why. We don’t charge a lot of money for our services. On average a legitimate credit repair company should charge anywhere from 35 to 90.00 per month max.
Before any complaint escalates to the level of a BBB intervention the consumer will contact the credit repair company with their complaint. At that point the company has an opportunity to make it right. Any company who values a couple dollars over a consumer’s trust and their reputation is not a company I would do business with.
Your Solution to a Horrible Reputation:
To check the record of any company go to the BBB’s website and simply type in their web address and you can see their track record whether they are members or not.
Warning Sign 2) Overseas Outsourcing:
Here’s the scary one to me. A current trend in the industry for some of the larger credit repair companies is outsourcing the work overseas to places like India, Nicaragua and Russia. Now let me say I don’t have a problem with these places or the people in particular.
However, it’s just a simple fact that the security and regulation may not be up to our standards and it’s something you should know about before you sign up.
When you sign up with a credit repair company here in the United States and give them your most precious information, wouldn’t you like to know before hand that your credit file is being faxed overseas?
Your Solution to Overseas Outsourcing:
Before signing up with any credit repair company simply ask them point blank. Does any part of their work get outsourced overseas? If so, I personally wouldn’t hire them.
Warning Sign 3) Partial Repair:
99% of every client we’ve ever had needs intervention on all levels. That means disputes with the credit bureaus, collection Agencies, Attorney’s and all of the original creditors. Most companies are only disputing on the credit bureau level (see generic template paragraph above…)
I would have to look long and hard for a client who didn’t need us to contact collectors or attorney’s, or negotiate their debts. I don’t think we’ve ever had a client who a letter to the credit bureau – ONLY – fixed all their problems.
Your Solution to Partial Repair:
Simply ask them this… Will you contact the collection agents, attorney’s and negotiate my debts if necessary? If they won’t, you’re not getting everything you probably will need to fix your credit.
Warning Sign 4) Worthless Dispute Templates:
Same problem as always. Generic dispute templates that are used over and over for every client are next to worthless. Do you seriously think the credit bureaus can’t spot them a mile away?
Your Solution to Worthless Dispute Templates:
Simple! Ask them for a copy of any letter before it goes out. They are disputing on your behalf you have the right to know what they are saying, if it looks something like this. I would drop them like a bad habit.
‘I just pulled my credit report and am disappointed that you have errors. I was never late on this account, under the laws of the FCRA please update that to never late and send me a copy of my new report’
The template changes a little here and there but you get the picture. If it doesn’t look completely unique to your personal credit file, it’s a template and a waste of your money.
Warning Sign 5) Being Left in the Dark:
Credit Repair companies charge you by the month (at least the legitimate ones do) and obviously milking your account for as long as possible is in their best interest.
You need to be able to track when and what is being done on your behalf by these companies. Credit bureaus and collection agencies have 30 days plus mail time to respond to all disputes. If the credit repair company doesn’t have a backend you can track exact timelines then you’ll never know if an extra week or two or three is being added to your account.
Solution to Being Left in the Dark:
Personally, I would opt for a company that has a backend you can log onto 24/7 and track notes, progress etc. Otherwise, you just have to hope you’re not being ripped off.
The above are the most common red flag warnings I see. No matter who you choose to repair your credit I would ask every one of those questions and research every item there.
That and a little common sense and you should do fine.