Since so many consumer credit reports are rife with errors and inaccuracies, and because correcting these errors is often a time consuming, Alice in Wonderland experience; an entire cottage industry of credit-repair companies has cropped up all over the country. Most, if not all, of these credit-repair companies are scams and rip offs.
There are numerous problems with credit-repair companies:
1. You don’t know who you are dealing with. Virtually anyone can start up and operate a credit-repair company. In contrast, lawyers must graduate from college and law school and pass the bar exam. Lawyers must comply with ethical rules that govern the legal profession. Lawyers owe a fiduciary duty to all clients. A fiduciary duty is a legal duty to act for someone else’s benefit, while subordinating one’s personal interests to that of the other person. It’s the highest standard of duty implied by law. Also, in Colorado, beginning in January, 2009, lawyers must disclose to their clients information about their legal malpractice insurance coverage. Therefore, there are numerous built in protections in the attorney-client relationship that do not exist between a credit-repair company and its customers. Click here for more information.
2. Credit-repair companies do not properly dispute information in your credit report. Credit-repair companies typically dispute using the internet and telephone. However, disputes should almost always be in writing, tailored to the specific facts and circumstances of each case, and sent via certified mail, return receipt to the credit bureau plus the applicable furnishers. In addition, copies of all relevant supporting documents should be sent. Credit-repair companies dispute as cheaply and quicklly as possible to the detriment of their customers.
3. The credit bureaus and furnishers (i.e. companies that furnish information to a credit bureau that will be included in your credit report) are legally permitted to ignore and not respond at all to disputes generated by credit-repair companies.
4. The recurring monthly fees charged by most credit-repair companies are unnecessary and a complete waste of money in most cases. The credit bureau will either permanently delete the disputed items or it will not. If the disputed items are deleted, then there obviously is no point for the consumer to continue to pay on-going monthly fees. And even if the disputed items are not deleted, there should only be an additional charge for another dispute. So a consumer should never pay recurring monthly fees to a credit-repair company. Recurring monthly fees paid to credit -repair companies are a scam and a rip off.
5. Because there have been so many problems with credit-repair scams and ripoffs, laws were passed which prohibit credit-repair companies from charging an up front fee before the promised credit-repair services are "fully performed." If a credit-repair company attempts to collect a fee from you up front before the services are "fully performed," then you should not only decline to pay this fee but also file a complaint against the company with the State Attorney Generals office and the Federal Trade Commission. Links to both are on the Web Resources page of this web site.
6. Many credit-repair companies make false or misleading promises and create unjustified expectations. The only thing that can done is to properly dispute items in your credit report. As explained above, most credit-repair companies don’t dispute properly. But even if disputes are properly handled, there is no control over how the credit bureau will respond. That is to say, the credit bureau will either delete the disputed items or not. So credit-repair companies that "guarantee" to delete all derogatory items from your credit report or "guarantee to restore your pre-theft identity" are making false and fraudulent representations.
7. Credit-repair companies don’t refer cases to attorneys for litigation to the detriment of their customers. In many situations, filing a lawsuit against a credit bureau is the proper course of action like when the credit bureau does not permanently delete inaccurate, derogatory items from your credit report. The employees working at credit-repair companies simply do not understand when a lawsuit should be filed. Further, since they are non-lawyers, they don’t have the ability or authority to give legal advise or file lawsuits on behalf of consumers. Yet most all credit-repair companies do not consult with or refer cases to attorneys for litigation when appropriate.
For more information about credit-repair companies and why they should be avoided, click here to visit the Missouri Attorney General's web site.
The law firm of Mark E. Kraynak, PC will help consumers properly dispute items in their credit reports. And we will file suit against the credit bureaus when necessary.