Wednesday, January 21, 2009

Identifying a Legitimate Credit Repair Firm

Text originally from the Better Business Bureau of Chicago and Northern Illinois:

Due to the troubling economic situation, many consumers seek out credit repair or debt settlement companies- here is what you need to know about them and how to determine their legitimacy.

1. These services cannot ask for money in advance.

2. They cannot automatically get legitimate negative reports off your credit report.

3. Be extremely cautious about a service that recommends you not pay your creditors so it can negotiate with them for you. This could negatively affect your credit report. A service should never guarantee that they can cut your debt by a specific percentage.

It is against federal law — the Credit Repair Organizations Act — for any credit repair company to charge you in advance for their services. The only time they can ask for payment is after all of the services they were to do for you are completed.

A credit repair company cannot tell you that they can get negative (but legitimate) items off of your credit report. The main aspect of credit repair organizations' work is writing to the credit reporting agencies to dispute the items on your report by asking for their validation.

If the items on your report are real, such as liens, bankruptcies, etc, the credit reporting agencies will not have a problem validating them. Also, keep in mind that disputing items on your credit report is something you can do by yourself, for free (although it is very time consuming). You can easily find the appropriate dispute letter templates on the internet

Many debt settlement or negotiation companies request that you don't pay your creditors and wait until you are behind in payments so that they can contact your creditors and attempt to negotiate to have your debt reduced in exchange for making a payment on the spot.

While some creditors may agree to this to get at least partial payment, your credit rating will suffer, your interest rates may go up, and you may have trouble obtaining future loans or financing.

Debt settlement or debt negotiation companies should not guarantee that by enrolling in their services, they can cut your debt by any specific percentage, such as "40-60 percent".

At CRA, we do not believe that debt negotiation is a way to go. It will destroy your credit rating. Many of our clients have used services such as this before enrolling in our program, and it is very difficult (but not impossible) to repair their credit.

Please call us for a free professional credit consultation. We can answer any questions about debt negotiation companies at that time - 1-800-671-1454.


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