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THE MYTH OF CREDIT REPAIR

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Ancient myth and folklore exist in every culture, but the most well-known probably stem from Greek history. Can you say Hercules? Mount Olympus? Zeus?

Today’s modern-day mythological equivalent, while definitely not shrouded in bravery, courage or even the power of love, is just as persuasive. We call it the myth of “credit repair.”

Why do we call it a myth? Because the fact is no company can repair your credit. They can, however, correct what is wrong on your credit report. If you find yourself unable to meet your debt obligations (and many people do get in over their heads), only you can repair your credit. That includes putting together a realistic budget, cutting household expenses, negotiating with creditors to get interest rates and payment amounts reduced, and paying your bills on time.

It can also include working with a company to help correct errors on your credit report(s). Unfortunately, there are many companies who are more than willing to take advantage of people struggling to overcome bad credit histories. They do so by exploiting the very law that was put into place to help consumers: The Fair Credit Reporting Act (FCRA).


The power of myths

If you’re wondering how, it’s really quite simple. Every consumer has the right to dispute inaccurate data in his/her credit report(s). You can do it on your own by directly contacting any of the three main credit reporting agencies (CRAs) or, given how cumbersome that process can be, enlist the services of a company specializing in “credit repair.”

A key point to note here – the law specifies your right to dispute inaccurate negative information. Specifically it states that what you don’t have a right to do is petition to have accurate, current, and verifiable information removed from your credit report. However, it can be removed if it is seven years or older (bankruptcy information is reported for 10 years).

Here’s where that whole myth of credit repair comes in. Some companies, for ongoing, hefty monthly fees, will send in a flurry of disputes on your behalf contesting accurate and inaccurate information. CRAs are required by law to respond and resolve every dispute within 30 days. Given the multitude of potential disputes, your “credit repair” company may unfairly succeed in getting negative, but accurate information removed from your report. But that’s only because the CRAs are unable to respond within the allotted time.

The hard reality

The reality is this hurts everyone. It hurts you because it erroneously inflates your credit standing, making you open to more loans and more debt you can’t pay off. It also hurts creditors who are put at risk for your loan default. Who pays then? We all do.

Remember, there are only three options when it comes to really repairing bad credit:

  • Consolidating debt to reasonably manage repayment
  • Debt settlement through negotiation with creditors (where part of your debt is erased, but you still pay something even though it's not nearly as good for your credit score as full repayment)
  • Correcting inaccurate data

If you need help correcting inaccurate data, partner with a company who commits to that as its first priority. And remember, the Credit Repair Organizations Act, which you can review at any time, prohibits deceptive practices in the industry.