Credit repair is the process whereby consumers attempt to get negative but accurate information removed from their credit reports. Opinions vary on the practice. Some would have you believe that credit repair companies are scam artists. Still others would say that credit repair is as legitimate as hiring someone to change your oil, a service that you can likely do yourself but choose not to. Wherever you fall on the credit repair debate one thing is certain, they are here to stay. And in almost all states their services are perfectly legal as long as they follow state and Federal law, such as the Credit Repair Organizations Act.
One credit repair company boasts that they had over 1,000,000 negative credit entries removed on behalf of their clients in 2009. Others are not so bold with their success meters. The process involves submitting dispute letters to the credit reporting agencies asking for verification of credit entries. If the credit bureaus cannot confirm their validity they must remove them until confirmation is received. According to Stuart Pratt from the Consumer Data Industry Association, the trade organization of the credit reporting agencies, "Our members estimate that on average across our members operating as nationwide consumer reporting agencies, no less than 30% of disputes filed are tied to credit repair." This number is estimated to be greater than 15 million annually across all credit reporting agencies.
The fees charged to credit repair customers range from $39 per month subscriptions (and higher) to several thousand dollars as a flat fee. Some claim to have found the magic formula for getting negative data removed from credit reports yet boast websites that look like they were built by 7th graders. Some insinuate “insider” access at the credit bureaus, which would be a criminal act. And some insinuate to have found legal methods for getting negative data removed. And while non of these claims can be substantiated, there’s little doubt that the credit bureaus will find themselves dealing with credit repair companies for the foreseeable future, especially with lenders increasing their credit scoring requirements.
John Ulzheimer – Credit scoring and credit reporting expert and author, John is the President of Consumer Education for Credit.com. Formerly with Equifax and Fair Isaac, John shares his unique insight of the inner workings of credit scoring models and the credit reporting industry on CreditBloggers.com.
