Credit Repair Firms Often Fix Nothing
By: Source: AARP Bulletin Today Date Posted: June 2003
After years of financial problems that often left her unable to pay bills on time, Charlene Blanchard's credit rating was so bad she couldn't even get a loan for a new car.
And so Blanchard did what hundreds of thousands of other Americans with credit problems have done: She turned to a "credit repair" firm that promised to turn things around—for fees that ended up exceeding $700.
"They told me they could clean up my credit in three months," Blanchard, a nursing home clerk in Baltimore, told the AARP Bulletin. "Nothing came off my credit report—not one lousy thing. I got gypped out of my money."
Blanchard isn't alone. According to the Federal Trade Commission (FTC), credit repair firms have bilked Americans out of millions of dollars.
The vast majority of credit repair firms, experts say, promise what they can't deliver—to "erase your bad credit," for example. What's more, they often advertise that poor credit ratings can be fixed—even if they're current and accurate. These for-profit operations aren't to be confused with nonprofit credit counseling services that help consumers reduce their debts and pay bills on time.
The Fair Credit Reporting Act of 1971 gives consumers the right to challenge the accuracy, validity and verifiability of their credit reports—the files compiled by credit bureaus—free of charge. It requires credit bureaus to investigate disputed items and to correct or remove inaccurate or unverifiable information.
Though it's time-consuming, people can improve their credit reports by challenging inaccurate information, says Lydia Sermons-Ward of the National Foundation for Credit Counseling that represents more than 1,300 local agencies. But she cautions consumers to watch out for false promises and fly-by-night operators—advice echoed by the Better Business Bureau and nearly all state attorneys general.
C. Steven Baker, director of the FTC's Midwest regional office in Chicago, goes further, saying that credit repair firms offer little if anything to consumers. "There's no magic bullet to fix a bad credit report," he says.
By law, credit repair companies must provide a written contract in advance that spells out your rights and cannot charge you until they have completed their promised services.
preview