According to the Federal Trade Commission (FTC) "Everything a credit repair clinic can do for you legally you can do
for yourself at little or no cost". While I agree with the FTC I also understand some consumers do not have the time, patience
(or knowledge) to do the work themselves and the thought of "drive-thru-we-do-it-all-for- you-credit-repair" becomes very
appealing. After all, everything a mobile oil change service can do for me I can also do myself at little or no cost (but
you won't find me changing the oil in my car this weekend!).
Although some things are better done yourself, only you can determine if doing your own credit restoration work will be
one of them. This is why understanding both the advantages and limitations of a credit repair company and the structure from
which it operates are VERY important.
REFERENCES: Any legitimate company or individual doing credit restoration work for consumers will be able to provide
you with at least half a dozen references. If the company or person is local you should be able to call these references.
This is without question the most important point of consideration when hiring a professional to do the work for you.
If possible, I suggest you ask friends, family, relatives and professional contacts if they know of someone who does credit
restoration work as a side business. By far the highest percentage of successful stories I hear from consumers are those which
come from those who found a credit consultant via personal referral. I cannot stress this enough. It's the difference between
going on a vacation with a close friend instead of a stranger.
CONTRACT: Unlike painting a house or putting in a driveway, credit restoration work (and results) are extremely
broad. Therefore, the use of a contract is imperative. Most likely your credit challenges didn't occur overnight and they
won't be improved overnight either. A good contract protects you as well as the service provider. The contract should be easy
to understand without an Attorney and spell out the actual services which will be rendered as well as the service providers'
limitations (i.e. they cannot guarantee the removal of any one particular item but can guarantee an overall increase in score
overtime).
MONTHLY FEE: One of the most critical elements which affects "how" a credit restoration company operates is determined
by its' payment structure. One of the most common payment structures of large companies or law firms doing credit restoration
is that of the monthly "auto-debit" fee. In this structure the consumer usually pays $49 to $99 up front and then a monthly
fee of $39 to $49 per month. While there is an advantage to this method (affordability) with it comes many disadvantages.
1.) The first disadvantage this structure creates is that it gives the company absolutely no incentive to work quickly
or aggressively on behalf of the consumer. In fact, the opposite is true. The longer they take the longer they will continue
to collect their monthly fee! In most cases this structure leads to slow results over a very long period of time. Looking
at it logically, this shouldn't come as a surprise.
2.) The other challenge within this structure is the actual amount of time, effort and resources which a company or law
firm can reasonably allocate on a consumer's behalf. Remember, any large business has a tremendous amount of overhead which
quickly chews up most of that monthly fee. Out of that $39 to $49 there are monthly expenses including but not limited to:
Advertising, Office Rent and Utilities, Employee Payroll and Taxes, Health Insurance, Phone Service, Office Supplies, Refunds,
Computer Maintenance and Programming, Website Administration, Office Supplies and let's not forget postage for mailing letters
to creditors, collection agencies and credit bureaus. A much simpler way to think of this is by imagining if you had a client
paying you $39 a month; how much work would you be willing to do?
3.) One of the biggest challenges credit repair companies charging low monthly fees run into is being forced to rely on
the use of Automated "Boiler Plate" Dispute and Correspondence Letters. Boiler Plate Letters are simple form letters which
are used for ALL consumers (one format fits all). Once set up in a computer program with the consumers' information they are
"shot out" automatically based on the consumers needs (i.e. late pay, charge-off, judgment etc).
The problem here is that when a credit repair company has thousands of clients they are shooting these form letters out
for, the creditors, collection agencies and credit bureaus can take notice of these letters being used over and over and discover
your correspondence is coming from a third party (i.e. credit repair company or law firm) and in some cases ignore it or (worse
yet) mark the dispute frivolous and flag your credit report. I spoke with a man recently who was on the inside of a large
credit repair company who informed me they had an archive of over 10,000 boiler plate letters on file to avoid this problem.
Of course, they charged customers by the month.
NON-DISCLOSURE OF METHODS: One of the most troubling issues with 95% of large credit repair firms (especially law
firms) is their non-disclosure of dispute tactics and methods. As a consumer it is vital that you are made aware of the methods
they are using in dealing with your creditors, collections and the credit bureaus. If the organization or law firm violates
laws or makes errors (I have witnessed both) you could be held liable for their negligence. In addition, this can actually
make your credit worse and create problems which are very difficult to clean up. Anyone doing credit restoration for you should
disclose "what" they are doing since you are paying for a service. If they won't, you better run the other way as they could
be pouring gas on a blazing camp fire.
LOCATED IN HOME STATE: This is one of the most overlooked keys to successful third party credit restoration which
consumers miss. It is absolutely vital when having someone else do your credit restoration work for you that they operate
within your home state. Here's why: if a credit repair company or law firm mails dispute letters or correspondence on your
behalf from another state, that mail will be postmarked from that state. If the credit bureau catches this they can (and in
many cases will) mark the dispute as frivolous and flag your credit file.
It is known that many Credit Repair Companies and Law Firms will resort to or create a method to avoid and out of state
postmark in order to get disputes postmarked from the consumers' home state (potentially violating postal regulations). For
example. If they are in NY and you are in CA they will first have to mail your dispute letters inside an envelope from NY
to CA. Once in CA someone opens the envelope and then mails your dispute letters from CA so they postmarked from your home
state. I am not an expert on postal regulations but had one postal employee tell me the concept sounded extremely shady at
best.
CUSTOMIZATION: It's for this reason that some of the most advanced forms of credit restoration are done completely
customized for the client and even (in many cases) by hand. The best credit restoration companies I've seen are usually run
by one person or a small number of people and are extremely customized for each client. The is the most effective but with
effectiveness comes cost. Every one of these services I have seen charges a very large upfront fee and works entirely off
of referrals. This type of service is simply impossible to perform for $39 or even $49 a month.
Unfortunately, if you are unable to find someone in your area (preferably an individual) by way of referral through a friend,
relative or professional contact, then I recommend you take matters into your own hands and do it yourself. I realize most
consumers do not want to hear this but the good news is that it will almost always turn out to be the highest paid work you
will ever do in your life. How high? How does $500 to $2500 an hour sound? I understand that's a bold claim but not one I
am unable to back up.
If you're ever going to finance a first or second home (which everyone eventually should for the tax breaks) the difference
between good credit and poor credit will affect your interest rate. If you secure a $200,000 mortgage on a 30 year term and
your interest rate is only 2% lower because of a high credit score, that 2% will save you $96,934.11 over the course of the
loan (just because you had better credit). Take that $96,934.11 and divide it by the 30 to 50 hours you may spend working
on your credit situation and you'll quickly realize credit restoration when done properly does not cost - it pays!
This is the end of our series for the "Credit Secrets Bible". Hopefully this convinces you to buy it. Order your copy now
by going to the website below. After all, you deserve it!
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The "CREDIT SECRETS BIBLE"
has been in print since 1994 and is published by Consumer Publishing Group. For more information on the "CREDIT SECRETS BIBLE"
click here.
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