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Credit Repair Companies: Consumer Credit Repair

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Credit Repair Companies

I felt it was extremely important to write about this because of the many people who may have seen their good credit fall to the wayside as a result of a recent job loss, cut back, family emergency or many other unforeseen circumstances who are desperately seeking for help with their personal credit.  credit repair

All across the country I have heard stories like Joanna Fridinger, owner of a limo company in Baltimore, who had the credit limit on her American Express card cut to $1,400 from $19,500 after getting just a single late fee on another credit card.

You’ve probably seen headlines like…

‘U.S. Consumer Credit Card Debt May Crash Economy’ ~ Fox News

‘Credit card hike fright: Banks raising rates, even if you’ve paid on time’ ~ Daily News

‘Some Credit Card Companies Profiling Customers’ ~ ABC News

‘Consumers’ Credit Card Limits Slashed as Companies Try to Reduce Risk’ ~ the Washington Post

With all this circulating the media it’s easy for some people to be influenced to believe that there is no hope and no way to get their credit back on track.

Not true!

When it comes to personal credit challenges there are several alternative solutions that each and every individual should consider.

In this particular post I am going to cover one of the many viable solutions for individuals undergoing personal credit challenges.

First, let me say that this is my personal opinion and after working with thousands of consumers on personal credit issues over 21 years one of the most commonly asked questions I hear is ‘ How can I get my personal credit restored?’

Before I get into this highly misunderstood service called ‘credit restoration’ or ‘credit repair‘ let me be the first to tell you that if you are an entrepreneur or small business owner that has experienced personal credit issues don’t be alarmed when it comes to obtaining business financing.

One of the major benefits for entrepreneurs and small business owners is the ability to build a business credit profile separate from your personal credit profile.

This post is intended to fully educate you on answering two main questions:

Is Personal Credit Repair Legal?

Are Credit Repair Companies Legal?

Let’s get started shall we?

Personal Credit Repair

The Federal Trade Commission which is a federal agency created to investigate and eliminate unfair and deceptive trade practices in business, initiated a specific body of legislation which was put in place to regulate the credit reporting agencies and protect YOU the consumer from unfair credit reporting. This legislation is called the Fair Credit Reporting Act.

Take a look at the FCRA

Now look at section 611 of the FCRA which outlines the procedures in case of disputed accuracy on your credit reports. The FCRA empowers YOU the consumer the right to dispute and verify the accuracy of questionable items on your personal credit reports.

So, this means you can in fact repair your own credit in accordance with the Fair Credit Reporting Act.

But here’ the catch!

The underlying problem for the consumer is that this is a self policing law. It’s completely up to you the consumer to police your own personal credit reports. It’s up to you to find any errors and it’s up to you to monitor any and all activity on your personal credit files with all three main credit reporting agencies.

In the justice system you are innocent until proven guilty but in the credit reporting system you are guilty until you proof yourself innocent.

If you haven’t seen your personal credit reports recently keep in mind that you are entitled to one free credit report per year which can be accessed at http://www.annualcreditreport.com

Now don’t worry this won’t count as an inquiry when you order your free annual reports.

Credit Repair Companies

Despite the massive efforts of the credit reporting agencies (which are privately held companies) to convince you otherwise, there are many credit restoration companies that are no different than most other services. Like all industries, less-than-honest companies do exist and are damaging to their clients and to the credit repair industry as a whole.

For example, you may have 20 car mechanics in your hometown. Most likely, 17-18 of these mechanics are honest, hardworking people who want to earn a living and give you the best service possible. The other 2 or 3 mechanics may not be so honest and will take your money while not giving you the quality or quantity of service you pay for… or, they may be out-and-out crooks who take your money and lie to you.

This doesn’t mean that your town is a bad place to get your car fixed; it just means that, like any industry anywhere, there are good companies, mediocre companies, and really bad companies.

Let me take you back a little bit first because the credit restoration industry was completely unregulated in the mid to late 1970s, hundreds of credit repair companies sprung up all over the place. Most of them were dishonest and were interested only in stealing money from gullible consumers. As a consequence, thousands of consumers were milked out of millions of dollars while receiving little, if any, of what was promised to them.

As a result the FTC initiated another legislation called the Credit Repair Organizations Act (CROA) that outlines how these companies may legally operate.

Take a look at CROA

This Federal regulation is proof that the industry as a whole is legal and not a scam. I think the reason why there has been this general negativity about credit restoration companies is because of the few bad companies that have given the industry as a whole a bad name.

The Federal Trade Commission regulates credit bureaus and credit repair organizations.

Take a look at the definition of a Credit Repair Organization (look at Sec. 403 Definitions)

(3) Credit repair organization. — The term ‘credit repair organization’–

(A) means any person who uses any instrumentality of interstate commerce or the mails to sell, provide, or perform any service, in return for the payment of money or other valuable consideration, for the express or implied purpose of

(i) improving any consumer’s credit record, credit history, or credit rating; or

(ii) providing advice or assistance to any consumer with regard to any activity or service described in clause (i); and

Now let’s look at Section 404 Prohibited Practices.

Specifically look at definition (b) payment in advance.

(b) Payment in Advance–No credit repair organization may charge or receive any money or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform for any consumer before such service is fully performed.

Basically, a credit restoration company cannot charge you for credit restoration upfront unless they are exempt from CROA.

The specific organizations and institutions that DO NOT fall under the definition of a credit restoration organization and are therefore exempt from prohibited practices are non profit companies, credit unions and affiliates of credit unions.

This means that there are a very select few credit restoration companies out there that can charge for credit restoration upfront.

Take a look at Sec 403 definitions under description (B) does not include-

These organizations and institutions include any nonprofit organization which is exempt from taxation under section 501(c) of the internal revenue code and any depository institution (as that term is defined in section 3 of the Federal Deposit Insurance Act) or any Federal or State credit union (as those terms are defined in section 101 of the Federal Credit Union Act), or any affiliate or subsidiary of such a depository institution or credit union.

So if you decide to enroll in a credit restoration service review the company’s track record and BBB rating and make sure they are either a non profit or credit union (affiliate).

Ready to reclaim your excellent credit scores? Submit your name and email below to receive my FREE course ‘7 Steps To Superior Credit’ ($497 value) =>

About the Author

business credit expert

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for AllBusiness, Dun and Bradstreet Credibility Corp, the SBA Community, and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.

FICO Vs. Credit Bureaus – Let the Battle Begin

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Boxing pic

FICO

It’s not a surprise that Fair Isaac, the creator of the good ole FICO® score got the go ahead from the court to pursue it’s lawsuit against the credit bureaus for trademark infringement. If credit score terms like beacon, empirica, and FICO® are not confusing enough consumers have to also figure out what role Vantage score (Created by America’s three major credit reporting companies) plays in the overall landscape when it comes finance.

The majority of business credit lenders acrosss the country continue to use FICO® as the their overall risk assessment tool for credit decisions but many of also adopted their own internal scoring system to compliment FICO®. In addition FICO® recently launced FICO® 08 to the mix leaving consumers in the dark as usual.

From debt to credit limit ratios, date of last activity, open accounts, closed account, new credit, old credit, payment history, credit profiling, mathematical algorithms, and on and on I’m starting to wonder if the credit system will soon be just as complex as our tax system.

So how does this lawsuit affect you?

In a nutshell FICO® is asserting that Transunion and Experian are misleading consumers with Vantage score.  (Equifax has already settled out of court with FICO®) It will be very interesting to see the outcome of this court battle. In my opinion the easier the credit scoring system can become the better it is for you and I.

Looking to build your business credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to vendor lines of credit, fleet cards, business credit cards with and without a PG, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free business credit building audio seminar ($597 value) =>

About the Author

Marco CarbajoMarco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for AllBusiness, a subsidiary of Dun and Bradstreet and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in the SBA Community, American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.

Discover What American Express Never Tells About Credit Reporting

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Credit OwnThe American Express card has spent years and years branding itself as the card you can’t leave home without. While the AMEX card has been one of the consumer’s preferred credit cards to own not much has been discussed when it comes to the way it reports the payment history of it’s customers.

While the majority of the media is focusing on credit lines being reduced, bank failures, and so on I want to address something that knowone seems to know about or pay attention to. Back in 2007  only after numerous consumer complaints nationally Capital One finally started reporting the true credit limits of it’s customers after years of only reporting the maximum balance used on consumer’s credit cards.

These credit limits showing on your personal credit profile have an important impact on your credit score because it reflects your true debt to credit limit ratios.

Unfortunately, some creditors like American Express have not adopted this practice and as a result millions of consumers are left out of the dark when it comes to ensuring their own true credit limits are being accurately reported on their credit reports to this day. This of course impacts the credit score and impacts what type of interest rate and/or loans a consumer qualifies for.

American Express and HELOC

American Express and HELOCS (Home Equity Lines of Credit) are known for not reporting the accurate credit limits of an account. For example, the American Express green card does not have an actual credit limit so the limit reported on the credit report of the consumer is actually the maximum amount that you have ever spent on that card. So if all you have ever charged on your AMEX was $3,000, and you paid it in full when the statement came and then you spend another $3k the following month, the $3,000 limit reported would show that you are using your card at 100% of your credit limit.

So what’s the solution?

Until AMEX comes to their senses and starts reporting the true credit limit of it’s customers you have to meet them at the court and play the game.

You basically have the power to set your own credit limit with AMEX on your credit reports. The question is what’s the percentage you want to shoot for on your debt to credit limit ratio with AMEX? No more than 30%! So, if you know that you regularly charge let’s say $3,000 per month on your AMEX then you want to make sure that the true credit limit reporting for your AMEX account on your credit reports is $10,000 or more. Why? Because if your limit reporting is $10,000 for AMEX and your charging $3k monthly then you are right at 30%, therefore your score will boost tremendously!

How do you set your own credit limit?

To increase and leverage that AMEX credit limit higher on your credit report, you should use your AMEX card and spend over $10,000 such as travelers checks or something like a TV then pay it off when the statement comes. Be sure to only set your limit if you know you can pay the balance in full when your statement comes in! The last thing you should do is go into debt simply for the purpose of raising your true credit limits with AMEX.

So once your statement comes in pay it in full. Next, go back to spending $3,000 again like normal. Your AMEX credit reporting limit would then increase to $10,000 as your limit and your regular spending habit of $3,000 would be below 30%.

You will need to reset your limit again in about 7-8 months so keep that in mind. This insider secret is priceless and this strategy alone can build credit fast and boost your credit scores 25 or more points!

Another option to offset your debt to credit limit ratios and boost your scores is by adding new credit lines with large limits and no balances.

Looking to build your business credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to vendor lines of credit, fleet cards, business credit cards with and without a PG, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free business credit building audio seminar ($597 value) =>

About the Author

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Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for AllBusiness, a subsidiary of Dun and Bradstreet and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in the SBA Community, American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.

Is the Credit Repair Business a Scam or Solution?

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Credit Repair ScamDespite the massive efforts of the credit reporting agencies to convince you otherwise, there are many credit repair companies that are no different than most other services. Like all industries, less-than-honest companies do exist and are damaging to their clients and to the credit repair industry as a whole.

For example, you may have 20 car mechanics in your hometown. Most likely, 17-18 of these mechanics are honest, hardworking people who want to earn a living and give you the best service possible. The other 2 or 3 mechanics may not be so honest and will take your money while not giving you the quality or quantity of service you pay for… or, they may be out-and-out crooks who take your money and lie to you.

This doesn’t mean that your town is a bad place to get your car fixed; it just means that, like any industry anywhere, there are good companies, mediocre companies, and really bad companies.

As for credit repair- do your homework. Is the company you are selecting a non-profit organization or credit union service organization? Are they claiming that they can delete accurate negative information? Do they provide you with consumer rights information? Do they charge outrageous fees?

Consumers should take these things into consideration when hiring a credit repair company to help them with their credit issues.

To better understand the credit repair business some background on the industry is necessary. Beginning in the mid to late 1970s, many unscrupulous entrepreneurs realized that millions of Americans have damaged credit report ratings and that they could make money by convincing these people they could remove all negative information from their credit files.

Because the industry was completely unregulated, hundreds of credit repair companies sprung up all over the place. Most of them were dishonest and were interested only in stealing money from gullible consumers. As a consequence, thousands of consumers were milked out of millions of dollars while receiving little, if any, of what was promised to them.

Federal and state authorities received numerous complaints about credit repair companies, and as a result, both federal and state governments began passing laws regulating the credit repair industry. In addition, credit repair companies must contract with all clients in writing before work begins and cannot collect any upfront fees unless they exempt from CROA.

Be sure to read ‘Credit Repair Fix‘ for more details regarding laws governing credit repair companies.

Despite such regulation, dishonest credit repair companies still operate. This bit of knowledge is used by dishonest credit repair services to perform credit repair for their clients. Their aim is to either overwhelm the Big Three with reverification requests (letter writing) with the goal of getting as much negative information removed as they possibly can, or hoping that a few requests slip through and result in the removal of negative information.

It is important to note that not all credit repair companies are dishonest. Some companies offer a valuable service to those who find the whole process of credit repair too boring or complex, or just don’t have the time to learn about credit repair. A Credit Repair Service is as legitimate and worthwhile as a tax preparation service — the IRS claims that everyone can do their own taxes, but most people hire someone else to do them.

There are a number of credit repair companies offering to give consumers a “fresh start” with their credit histories. These companies seek to obtain a second Social Security number or federal ID number for their clients. This is commonly referred to as “file segregation”. File segregation is a fraudulent practice and violates many Federal and State Laws.

I strongly oppose the abuse of consumers by companies and individuals which direct you to commit fraud in order to obtain “clean” credit reports. In this scheme, you are promised a chance to hide unfavorable credit information by establishing a new credit identity. That may sound perfect, especially if you’re afraid that you won’t get any credit as long as bankruptcy appears on your credit record. The problem: “File segregation” is illegal. If you use it, you could face fines or even a prison sentence.

If you have filed for bankruptcy, you may receive a letter from a credit repair company that warns you about your inability to get credit cards, personal loans, or any other types of credit for 10 years. For a fee, the company promises to help you hide your bankruptcy and establish a new credit identity to use when you apply for credit. These companies also make pitches in classified ads, on radio and TV, and even over the Internet.

If you pay the fee and sign up for the service, you may be directed to apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). Typically, EINs – which resemble Social Security numbers – are used by businesses to report financial information to the IRS and the Social Security Administration. After you receive your EIN, the credit repair service will tell you to use it in place of your Social Security number when you apply for credit. They’ll also tell you to use a new mailing address and some credit references.

To convince you to establish a new credit identity, the credit repair service is likely to make a variety of false claims. Listen carefully; these false claims, along with the pitch for getting a new credit identity, should alert you to the possibility of fraud. You’ll probably hear:

Claim 1: You will not be able to get credit for 10 years (the period of time bankruptcy information may stay on your credit record).

Each creditor has its own criteria for granting credit. While one may reject your application because of a bankruptcy, another may grant you credit shortly after you filed for bankruptcy. And, given a new reliable payment record, your chances of getting credit will probably increase as time passes.

Claim 2: The company or “file segregation” program is affiliated with the federal government.

The federal government does not support or work with companies that offer such programs.

Claim 3: The “file segregation” program is legal.

It is a federal crime to make any false statements on a loan or credit application. The credit repair company may advise you to do just that. It is a federal crime to misrepresent your Social Security number. It also is a federal crime to obtain an EIN from the IRS under false pretenses.

Further, you could be charged with mail or wire fraud if you use the mail or the telephone to apply for credit and provide false information. Worse yet, file segregation likely would constitute civil fraud under many state laws.

All the information in this post is provided to help clear up those “questionable” items on your credit reports. “Credit repair” is a general term usually used to describe a systematic process of rehabilitating an individual’s creditworthiness, or financial credit reputation.

The process is generally started by obtaining copies of the individual’s credit report, reviewing the credit report for errors, omissions, and misleading information, and requesting corrections to such information by means of a formal dispute letter. Many laws, regulations, and practices govern this process, and many organizations exist that will assist in guiding individuals through this sometimes complex process, though much, if not all, may be accomplished by individuals by their own efforts.

When you identify inaccurate, erroneous, and obsolete entries on your credit reports and bring it to the credit reporting agency’s attention they must do one of two things by law. Correct it or delete it!

If you are in the process of applying for a mortgage, immediately notify your lender of any incorrect information in your report and you may be able to do a rapid re-score.

Looking to build your business credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to vendor lines of credit, fleet cards, business credit cards with and without a PG, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free business credit building audio seminar ($597 value) =>

About the Author

business credit expert

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for AllBusiness, a subsidiary of Dun and Bradstreet and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in the SBA Community, American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.

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