It's pretty common knowledge that there are a lot of dirtbags in the credit repair business. It may surprise you then that there are legitimate firms out there that can in fact improve your credit score quickly. And since according to CNNMoney mortgage interest rates have dropped like crazy--but ONLY for those with credit scores of 740 or higher--improving yours could save you a ton of cash over the life of your mortgage.
So, how do the good guys fix your credit score? These firms, called credit resellers or rapid rescorers, often work with mortgage companies. They can update and remove inaccurate or outdated credit information quickly, often much more quickly than you or I can. Studies show nearly everyone has some inaccurate derogatory information on their reports. When a few points can make all the difference, why not remove it and improve your score? And if you are a victim of fraud or identity theft you have bigger headaches and bigger reasons to take care of them. Sometimes, resellers can even get creditors to change the reported information based on extenuating circumstances like medical problems. Because of the relationships these people have with creditors and bureaus, they can often fix things faster than the consumer can. For example, it may take you a month to get a reply from a credit bureau about an erroneous item--too late to close on your home loan. Resellers may get items taken care of in 72 hours or less, for about $30 to $50 each.
Resellers have good success rates because unlike you and me they do this all day long and know the right people to resolve problems. In addition, they analyze credit histories and reject applicants they can't help (unlike the dirtbags who will take your money all day long but may not accomplish anything). They don't market directly to consumers but get clients on lenders' recommendations. They provide required Consumer Credit File Rights and abide by the Credit Repair Organizations Act, which states that you cannot be charged for services until they have been performed.
How Can you Spot the Dirtbags? There are five signs when credit repair firms might not be on the up-and-up:
1. They try to charge you upfront. That's illegal under the Credit Repair Organizations Act. If the company tries to dodge this by claiming to be something other than a credit repair shop, then what are you hiring it for?
2. They don't advise you of your rights. You should be given a copy of the Consumer Credit File Rights before you sign any contract with them.
3. They advise you to dispute everything bad on your credit file, regardless of accuracy. These guys have no contact with bureaus and hope to improve your score by sending mass mailings disputing everything and hoping to get lucky if the bureau can't verify all the items within 30 days. Of course, once verified the negative tradelines come back.
4. They guaranty to improve your credit score. Resellers / rescorers will make no such claims. Even when they successfully erase an item there is no guaranty that your score will increase--that depends on the bureau's computer scoring and how it looks at your history.
5. They try to get you to creat a new identity by using an employer identification number (EIN) to apply for credit or obtaining a fraudulent social security number. This is illegal and could get you prosecuted.
Legitimate credit repair firms can't get accurate information removed. Their chief advantage is the speed with which they work (when you need it done in days instead of weeks) and in their relationships with creditors that could get derogatory information "softened" in light of mitigating circumstances. And, while consumers can wade in and assume much of this burden themselves it's more efficient in many cases to have an expert do it and not spend the time.
