We’ve all heard about the stalemate in the financial sector…
There’s a ton of money to lend, and a lot of people that need loans. The problem is, there also exists a significant chasm between the two. That chasm..? Anemic consumer credit scores. Everyone agrees that we need more jobs, that we need businesses to flourish to allow for job growth, and that we need the banks we bailed out with TARP funds to start lending money. And regardless of whether you lean toward the political right or left, and irrespective of exactly where in the cycle you think the recovery begins, consumer credit scores are significantly impacting the speed of the recovery.
In the late 80’s, credit scores became the primary basis for deciding whether or not loans were granted, and there’s been a growing dependency on credit scores ever since. In a perfect world, your credit score represents a statistically calculated measure of your likeliness to repay a debt. The problem is, the reports used to calculate those all-important scores have been shown to contain a significant number of inaccuracies. In fact, a study commissioned by the US Public Interest Research Group in 2004 found that, “79% of the credit reports surveyed contained either serious errors or other mistakes of some kind.”1
What are they to do, though, if they find errors in their credit report? Basically, there are two options, to deal with inaccurate information on consumer credit reports. Consumers can start the correction process on their own, utilizing various consumer protection laws enacted to aid consumers in correcting misinformation, or they can hire credit repair experts to do it for them. Both have their merits, and both have their caveats.
Do-it-yourself credit repair is generally the most cost-effective method, with the majority of the expense coming in the way of postage. Evan Hendricks, one of the nation’s leading consumer credit experts, in his book “Credit Scores & Credit Reports” stated that certified mail is the best way to guarantee the best overall results.2 But handling it yourself may also be far more labor-intensive. Depending on your schedule, you may or may not have time to do the research necessary to construct effective disputes, let alone do so multiple times, to multiple credit bureaus. This also doesn’t take into account that it is the consensus of those in the know that for best results, individual creditors and collection agencies should also be contacted for best results. However, in the event that you have the time, and are willing to spend it, succeeding in bringing your credit reports to complete accuracy and completeness can be very satisfying, and achieve the desired result.
In the case of those for whom time is their premium, and who have the money to do spend, there do exist many credible credit repair companies. Assuming they afford the purchase of credit repair the same due diligence as they would any other financial service provider, it’s not difficult to find a respected professional for help. Here are some things to look for when researching professional credit repair:
Credentials – Most states require a registration or licensure to operate as a credit repair organization. Most legitimate credit repair companies post these credentials online. Check with your state’s Attorney General or Secretary of State for help. Fees – This is a two-part concern. If it sounds too cheap to be real, it probably is. But it’s important to know that the practice of charging up-front fees for credit repair is expressly forbidden in the federal Credit Repair Organizations Act. This is a hotly-contested legal issue right now, as many states allow up-front fees, if the company is registered and possesses a surety bond, ranging upward from $10,000. Reputation – Obviously, there’s no substitute for a referral, either from a friend, family member, or a trusted financial advisor who has experienced measurable, consistent results with whomever they refer. And remember, internet searches typically place companies who have PAID to be there at the top of the results page, so don’t assume that because they came up first in a Google search, they’re the best bet. As for the so-called ‘bandit signs’ often seen at busy intersections, guaranteeing results, and listing only an 800 number, just know that these are typically the companies most often found to run afoul of the law. BBB – The Better Business Bureau is intermittent at best with respect to its treatment of credit repair companies. In some areas, credit repair organizations are afforded all of the privileges of any other business, while other areas have made an arbitrary decision to effectively ‘blackball’ credit repair companies, and give them all an ‘F’ rating, regardless of their track record or complaint history. Results – Of course, the greatest measure of a credit repair company’s effectiveness is the results it has gotten with past and present clients. Be on the lookout for publicly posted testimonials and actual, recent results.
In a day and age when the financial world is fraught with peril, with those seeking to take advantage of the many who have been adversely impacted by the recent financial turbulence, there is hope. But it’s important to remember that one’s personal economic recovery is no different than that of the nation itself… A little bit of research, a healthy measure of common sense, and good old-fashioned time can cure all.