Scam /skam/
noun informal
1. a dishonest scheme; a fraud.
“an insurance scam”
synonyms: fraud, swindle, racket, trick
verb
2. swindle.
“a guy that scams the elderly out of their savings”
synonyms: swindle, cheat, deceive, trick,
dupe, hoodwink, double-cross
(Merriam-Webster Dictionary)
The warnings are all out there – on the internet, in Public Service Announcements (“PSA’s”), and by word-of-mouth from consumer-to-consumer.
Do NOT fall for scams that promise easy, overnight “credit repair” or one-step “credit restoration”.
As any credit repair service or agency will gladly tell anyone with ears: “Credit repair can involve fixing bad credit in many ways… Many people, however, don’t have the time or don’t understand how to make their case, so they look into hiring a credit repair company…” (emphasis added).
Read that lead sentence (from a credit.com ad for THEIR credit repair service) carefully: “Many people don’t have the time…” and… many people “don’t understand” – two sure warning signs for consumers to guard their wallets when those are the first words in an advertisement (aka “come on”) by a – wait for it – credit repair company.
The consumer who is dealing with bad credit and thinking of hiring a “credit repair” company, agency, or “professional” will do him or herself a favor by first remembering the following:
credit repair businesses are, generally, for-profit enterprises.
First-and-foremost, these businesses are in the “game” to make
money (i.e. their first motive is not to help the consumer – rather,
it is to turn a profit and make money) …
Gullibly relying on “come-on’s” or “promises” is the first mistake that a consumer with poor credit should avoid. That consumer should ask: “is it a wise move to go deeper into debt – to a “credit repair service”, no less – to try to get out of debt and reestablish a good credit score?”
According to a recent report by the Federal Trade Commission (“FTC”), there are over 68,000,000 “score-able” consumers in the United States that have an average “credit score” that falls below 601 (meaning they have “bad” or “poor” credit). With a present total population of 326,766,748, the 68,000,000 represents over 1 in 5 of all Americans.
Put another way, 20% of the overall population is a fairly ripe number of prospects for credit repair outfits – many of them “predatory” and many of them fraught with “scams”.
Disclaimer: The above warning is not to say that all credit repair services or companies are “scam Mills”, “fly-by-night” predators, or “out to fleece” unwary consumers. The warnings are stated in the spirit of caveat emptor – “let the buyer beware”.
Non-Profit vs. For-Profit Credit Repair
Non-profit “credit repair” is usually couched in terms of “credit counseling services”. Non-profit credit counseling organizations receive funding from creditors. Such funding allows those agencies to provide services to anyone regardless, of income levels, at a lower cost. Such organizations do charge fees (remember this: “there’s no such thing as a ‘free’ lunch”). Those are usually minimal. For those in severe financial hardship, fees are often waived. And, no one is turned away because of an inability to pay or they are just shopping around for alternative debt management solutions.
By contrast, for-profit credit repair or counseling services charge fees that are generally much higher because of the profit motive and the need and desire to make a profit. With the for-profits, additional and alternative funding sources are not available to offset any of the costs to the consumers.
One highly-regarded and well-known non-profit credit counseling organization is American Consumer Credit Counseling (“ACCC”). The ACCC is approved by the Department of Justice to provide pre-bankruptcy credit counseling and, for those who ultimately file for Chapter 7 Bankruptcy, post-filing debt management education and counseling. The ACCC provides a wide range of services, from credit counseling, pre-bankruptcy services, and post-bankruptcy filing education.
Most for-profit agencies deal primarily with the three major credit reporting agencies (i.e. Experian, Transunion, and Equifax) and focus primarily on “repairing” errors and inaccuracies in a consumer’s credit report.
Repairing Credit on Your Own
While dealing with “credit repair” and “restoration” may seem like a monumental task, it does not rise to the level of “rocket science” by any standard. Granted, most people with credit “problems” are stressed. They may find any task that takes time away from their family, a job, or everyday endeavors onerous and burdensome. Stress and credit problems go hand in hand and that is a given. However, dealing with credit repair issues and taking charge can be reduced to about five or six fairly easy, manageable steps. Consider the following:
Step One: Know your credit situation – find out how “bad” it really is.
A consumer should begin the process by obtaining copies of their current credit reports from each of the three major credit reporting agencies. Every consumer is entitled to obtain – FREE of charge – an annual copy of a credit report from each of the agencies.
The annual free report can be obtained from: www.annualcreditreport.com or by calling: (877) 322-8228.
Step Two: Once a consumer obtains current copies of all three credit reports, the next step is to study them carefully, looking for errors or inaccuracies.
First, check all identity information such as names and name spelling, social security numbers, and address information. Errors in identity information will have a negative impact on credit scores.
Second, examine information relating to credit cards, outstanding debts, and major purchases for accuracy. Mistakes and errors will likely be found. In that case, make a copy of the report in question and highlight the questionable entry or entries.
Third, write a letter to the reporting agency in question (a copy can also be sent to the “data furnisher” for the questionable entry – but – the “complaint” should be directed, first, to the credit reporting agency). All records should be retained, and all notices, complaints, disputes, and follow ups should be in writing and sent via certified mail – return receipt.
Step Three: Work diligently to clean up credit AND live within your means going forward.
This means consumers working to “clean up credit” should pay all bills on time 100% of the time, pay down debt – especially credit card debt – and avoid incurring new debt, and avoid applying for new credit (i.e. loans, credit cards, etc.).
Step Four: Don’t miss payments and don’t be “late” on making payments when due.
Consumers who are “behind” in paying debts – especially credit card debt – should do all they can possibly do to “catch up” and become current. The single most important factor affecting a credit score is ON-TIME payments. Miss a payment, or even pay “late” will negatively affect a credit score. Always being on-time and NEVER late will help repair credit and have a positive affect on a credit score.
Step 5: Credit cards can be the ultimate nemesis of a consumer. They are easy to use and even easier to “abuse”.
Managing credit card debt is one of the best ways to improve credit scores and credit. Consumers should work diligently to pay down credit card balances, not over charge credit cards, and avoid applying for new cards (or any “new credit” at all) while working to positively improve a credit score and reputation.
Conclusion
Not all “credit repair” companies are evil, and not all are out to perpetrate a fraud against debtors and consumers. But – remember the watchword phrase caveat emptor and always beware.
Non-Profit credit counseling agencies exist and generally charge less than for-profits.
In the end, a consumer seeking to improve his or her credit and/or credit score may be well-advised to give it a shot to work on their own at NO cost out-of-pocket.
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