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What To Look Out For In Credit Repair Companies

The housing bubble that led to the housing bubble burst in 2008 started a decline in the value of homes, including those in St Louis, for the following 3 to 4 years.  This resulted in a much larger number of homeowners facing financial struggles including late payments, foreclosures, short sales, bankruptcy and the like, than was the historic norm.  As a result, while maybe not a new concept but certainly one that had been more obscure in the past, credit repair, became a lucrative and growing business as consumers sought to repair the damage done and position themselves to buy a home.

In St Louis, there are many companies offering credit repair services, with many making some pretty enticing sounding claims with regard to removal of negative items from your credit, improving your credit score in a short time period and so on.  While there are reputable companies out there doing a good job for St Louis homebuyers looking to improve their credit no doubt, there are also some that are probably not doing much more for the consumer than they could easily do on their own or, worse yet, perhaps very little at all for the fee paid.

How do you find a good credit repair company in St Louis?

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For starters, if you are someone whose primary purpose for credit repair is to get yourself in a position to buy a home, there are many knowledgable and experienced mortgage loan officers with St Louis mortgage companies that will help you, for free!  While credit repair is not their primary function, it is common for a mortgage loan officer to work with a potential home buyer, sometimes for a fairly long period of time, to help them get in a position to be able to buy a home.  This includes the giving of advice and suggestions on things you can do to improve your credit situation.  What’s in it for the loan officer is, in addition to the reward of helping someone in need, which for many of the loan officers I know that means something, they are also creating a relationship with a potential future home buyer that will most likely stick with them and obtain their mortgage through them.   So, it’s a win-win.

However, there are those situations where a potential homebuyer is going to need more credit repair, or more intensive help than a loan officer can provide and will need to seek out a credit repair company.  If you are in that category, how do you find a good credit repair company in St Louis?  Just like is a good practice when seeking other professionals, it’s hard to be a personal referral.  So, you may want to start by talking to a real estate broker or agent that will refer you to a lender and/or credit repair company they are familiar with (feel fee to contact me, I’m happy to help) or by speaking with a mortgage loan officer that will either be able to help you themselves, or, if not, make a recommendation of a credit repair company.

In addition, you can take the advice of Consumer Finance Protection Bureau (CFPB), the government watchdog of financial related businesses, including credit repair companies.  For example, the CFPB  recently took action against four California-based credit repair companies and three individuals, fining them more than $2 million.

Advice from the CFPB on what to look out for with credit repair companies…

The CFPB issued a consumer advisory titled “Don’t Be Misled by Companies Offering Paid Credit Repair Services“, in which they give the five red flags to look out for below:

Be on the lookout and aware of these five examples of red flags:

  • Demands payment upfront: The company wants you to pay before it provides any services. Under the Credit Repair Organizations Act, credit repair companies can’t request or receive payment until they’ve completed the services they’ve promised. Some companies will structure monthly payment plans to avoid this requirement, and you should know that no form of upfront payment is legal. A simple rule to follow is “Don’t pay upfront.” If the company uses telemarketing such that the Telemarketing Sales Rule applies, the company may not request or receive fees until it has provided you with a credit report generated more than six months after the promised results that shows the results.
  • Sounds too good to be true: The company tells you it can get rid of the negative credit information in your credit report in a short period (even if that information is accurate and up-to-date), promises a specific increase in credit score, or guarantees results. No one can do this. It simply takes time to repair your credit file.
  • Can’t answer questions: The company representative cannot explain the specifics of the services they are offering you or the total cost for those services. Asking a few simple questions can help you determine if you are dealing with a reputable organization.
  • Holding back or providing misinformation: The company doesn’t inform you of your rights, including your right to obtain a written contract outlining the details of your arrangement, as well as having the ability to cancel your contract with the company within three business days. The company does not disclose the full cost of its services, and/or the company suggests that you should not (or cannot) contact any of the nationwide credit reporting companies directly (you can).
  • Asks you to misrepresent information: The company suggests that you try to invent a “new” credit identity – resulting in a new credit report – by applying for an Employer Identification Number instead of your Social Security number.
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