March 4, 2015

Should You Work with a Credit Repair Organization?

Our Oklahoma City used car dealership specializes in helping people with bad or no credit get quality used cars and other services. Along with selling cars, we answer a lot of questions from customers who want to repair their credit and get their finances back on track. One of the most common questions we hear is, “Should I use a credit repair organization?”

The Problem With Credit Repair Organizations

Oklahoma City Credit Repair

On paper, a credit repair organization seems like a good idea. These companies tell potential customers that they can clean up credit reports, erase old debts, help you set up payment plans, and even get you financed for loans you wouldn’t be able to earn on your own. If these claims seem a little too good to be true, that’s because they often are. Credit repair organizations may use shady or even illegal tactics to “fix” your credit just long enough to collect your payments and disappear.

Here are a few of the most common tactics and strategies that dishonest credit repair companies use to deceive customers.

Disputing Credit Report Problems: One of the most common “services” that these organizations provide is contacting creditors or other companies and disputing credit problems on your behalf. In some cases this is a useful service, but this is almost always something that is better to do yourself. Using a credit repair organization does nothing but saving a bit of time on the phone. Furthermore, many organizations will claim they’re disputing items on your credit report, then simply give up and say they couldn’t contact the creditor or couldn’t resolve the problem.

File Segregation: Some credit repair companies have their customers contact the IRS to set up an Employer Identification Number and then use that number to file for credit. This creates a new credit file that isn’t attached to your Social Security Number. Unfortunately, this tactic is also illegal and can land you in major hot water with the IRS and law enforcement organizations.

Collecting Payments Up Front: It’s common for the less-trustworthy credit repair organizations to ask for payment for their services up front, in order to fund their efforts to get your credit cleaned up. However, this tactic has been illegal since 1996, when the FTC enacted the Credit Repair Organizations act. Under the law, credit repair companies can only demand payment after providing the services they promised.

Identity Theft: In an effort to make it look like their tactics are working, some dishonest credit repair organizations will apply for credit on your behalf (or have you apply yourself) using falsified or stolen information. This is obviously an illegal tactic, but since many customers don’t follow the organization’s tactics closely it can cause huge problems.

The fact of the matter is, the only thing that can repair your credit for real is time and effort. Credit repair organizations that claim they can repair your credit report in just a few days are deceiving you, and you shouldn’t work with them or give them anything. Fortunately, most of the services that a credit repair organization says they will perform for you can be done on your own without costing a dime.

How to Repair Your Own Credit

One of the biggest things you can do to repair your credit is simply to get your credit reports from the major reporting bureaus and see what they contain. While these reports won’t include your credit score, they do show you all the items that negatively affect your credit. In most cases, that’s all the information you need to start repairing it.

Once you get your credit report, you can examine it for discrepancies and problems. Credit report discrepancies can vary widely from person to person, but often include things like previously-resolved debts or collections, inaccurate information, and even signs of identity theft. With a little effort you can contact these creditors or institutions and get many of these discrepancies cleared up, providing an instant boost to your credit.

Unfortunately, you can’t remove information from your credit report that belongs there. Accurate debts, late payments, collections, and other data all stay on your credit report for up to seven years, meaning that it takes time to rebuild your credit once you’ve taken some hits. So what can you do to lessen the impact of negative items on your credit report?

First, start working to pay down your debts and repair your credit the old-fashioned way. In some cases it can help to consolidate your debts with a debt-consolidation agency. These agencies work by buying up old debts and consolidating them into a single payment, often less than what you owed originally and at a better interest rate. You’ll still have to make your payments, but you’ll only have to make one or two each month rather than a bunch.

Second, you can work with a credit counselor or a credit coach to build a payment strategy and learn about keeping your debts in check. A good credit counselor can help you make lifestyle changes and teach you about ways to effectively manage your credit. They also can guide you through the process of disputing your credit report and making repairs. Plus, they often work for free.

Finally, make sure you keep an eye on your credit reports and do what you can to stay on top of any issues or problems. Your finances are your own business, and you need to make an effort to take care of them if you don’t want to have more credit problems in the future.

Want to learn more about your credit and how to repair it? At The KEY, we offer free credit counseling and other financial and life services for all our customers. We also offer high-quality used cars with special financing, so you can drive away even if your credit is less than perfect. Contact us today to learn more or follow us on Facebook or Google+ for extra tips and advice!