Facts Consumers Should Know Before Using A Credit Repair Company (Part 1 of 2)
Have you ever wondered about those ads you see from
companies and law firms which offer to fix your credit for
a low monthly fee? People with credit problems often ask
me when it comes to improving their credit score whether
they should hire a credit repair company or do it
themselves? Unfortunately, there is no simple or universal
answer to this question. However, I will shed some light on
the subject if you're in need of a little enlightenment.
According to the Federal Trade Commission (FTC) "Everything
a credit repair clinic can do for you legally you can do
for yourself at little or no cost". While I agree with the
FTC I also understand some consumers do not have the time,
patience (or knowledge) to do the work themselves and the
thought of "drive-thru-we-do-it-all-for- you-credit-repair"
becomes very appealing. After all, everything a mobile oil
change service can do for me I can also do myself at little
or no cost (but you won't find me changing the oil in my
car this weekend!).
Although some things are better done yourself, only you can
determine if doing your own credit restoration work will be
one of them. This is why understanding both the advantages
and limitations of a credit repair company and the
structure from which it operates are VERY important.
REFERENCES: Any legitimate company or individual doing
credit restoration work for consumers will be able to
provide you with at least half a dozen references. If the
company or person is local you should be able to call these
references. This is without question the most important
point of consideration when hiring a professional to do the
work for you.
If possible, I suggest you ask friends, family, relatives
and professional contacts if they know of someone who does
credit restoration work as a side business. By far the
highest percentage of successful stories I hear from
consumers are those which come from those who found a
credit consultant via personal referral. I cannot stress
this enough. It's the difference between going on a
vacation with a close friend instead of a stranger.
CONTRACT: Unlike painting a house or putting in a driveway,
credit restoration work (and results) are extremely broad.
Therefore, the use of a contract is imperative. Most
likely your credit challenges didn't occur overnight and
they won't be improved overnight either. A good contract
protects you as well as the service provider. The contract
should be easy to understand without an Attorney and spell
out the actual services which will be rendered as well as
the service providers' limitations (i.e. they cannot
guarantee the removal of any one particular item but can
guarantee an overall increase in score overtime).
MONTHLY FEE: One of the most critical elements which
affects "how" a credit restoration company operates is
determined by its' payment structure. One of the most
common payment structures of large companies or law firms
doing credit restoration is that of the monthly
"auto-debit" fee. In this structure the consumer usually
pays $49 to $99 up front and then a monthly fee of $39 to
$49 per month. While there is an advantage to this method
(affordability) with it comes many disadvantages.
1.) The first disadvantage this structure creates is that
it gives the company absolutely no incentive to work
quickly or aggressively on behalf of the consumer. In
fact, the opposite is true. The longer they take the
longer they will continue to collect their monthly fee! In
most cases this structure leads to slow results over a very
long period of time. Looking at it logically, this
shouldn't come as a surprise.
2.) The other challenge within this structure is the
actual amount of time, effort and resources which a company
or law firm can reasonably allocate on a consumer's behalf.
Remember, any large business has a tremendous amount of
overhead which quickly chews up most of that monthly fee.
Out of that $39 to $49 there are monthly expenses including
but not limited to: Advertising, Office Rent and Utilities,
Employee Payroll and Taxes, Health Insurance, Phone
Service, Office Supplies, Refunds, Computer Maintenance and
Programming, Website Administration, Office Supplies and
let's not forget postage for mailing letters to creditors,
collection agencies and credit bureaus. A much simpler way
to think of this is by imagining if you had a client paying
you $39 a month; how much work would you be willing to do?
3.) One of the biggest challenges credit repair companies
charging low monthly fees run into is being forced to rely
on the use of Automated "Boiler Plate" Dispute and
Correspondence Letters. Boiler Plate Letters are simple
form letters which are used for ALL consumers (one format
fits all). Once set up in a computer program with the
consumers' information they are "shot out" automatically
based on the consumers needs (i.e. late pay, charge-off,
judgment etc).
The problem here is that when a credit repair company has
thousands of clients they are shooting these form letters
out for, the creditors, collection agencies and credit
bureaus can take notice of these letters being used over
and over and discover your correspondence is coming from a
third party (i.e. credit repair company or law firm) and in
some cases ignore it or (worse yet) mark the dispute
frivolous and flag your credit report. I spoke with a man
recently who was on the inside of a large credit repair
company who informed me they had an archive of over 10,000
boiler plate letters on file to avoid this problem. Of
course, they charged customers by the month.
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The "CREDIT SECRETS BIBLE" has been in print since 1994 and
is published by Consumer Publishing Group. For more
information on the "CREDIT SECRETS BIBLE" you may visit:
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