WARNING: Credit Repair Scams
Are you credit scores low? What can your credit score impact? Many people are not aware that their credit scores could affect their employment or employability. Now the a once quiet cottage industry (several have popped up in the Naples area) - credit repair companies are starting to appear on the horizon. Is this a solution for you? Are the results guaranteed?
Recently an e-mail was received with an advertisement for "a credit repair business" that sounded great!
Your credit scores impact could impact many aspects of your financial life. Some of the more most commonly aspects are interest on a mortgage, interest on unpaid credit card balances, interest on auto loans, cost of auto lease payments, homeowners insurance, life insurance, etc.
However, no one thinks about future employment or current employment!
Some employers as part of their pre-employment checks will request (of course, with your permission) a credit report. Poor or low credit scores could be a reason for denial of employment, especially in certain sensitive jobs, especially where there is cash or negotiations maybe involved. In some industries it is not uncommon for an employer to request credit reports on an annual basis to determine, if an employee should continue in a sensitive position. Why? Because, the poor to low credit scores could be sign of an individual having financial difficulties, which an individual is pressured to resolved by the unauthorized use of a company’s assets.
Below are some quotes from the e-mail and my thoughts and comments.
"Many Americans dream of having their own business. In the wake of the recent subprime meltdown, there is a growing demand for credit repair to meet the new conditions of the market. This presents an ideal opportunity for individuals looking to build themselves up as others merely accept the downturn."
Notice the use of "ideal opportunity" - capitalizing on the misfortune of an individual or their naivety regarding how they can accomplish their own credit improvement. One has to wonder if the same unemployed mortgage broker will now turn to this "opportunity" to assist the same people they got into financial trouble with an unsuitable mortgage program.
"Gone are the days of 100% financing for borrowers that should never have been approved. Every day you hear of lenders taking away products that were so readily available to the subprime market just a few months ago."
They readily admit that some borrowers "should never have been approved." If they had low credit scores, the scores surely have not improved and in fact, they have may dropped. Be aware that credit repair or correction will only correct incorrect information. It will not change derogatory information that is correct!
"It is widely known that 7 out of 10 people have negative items on their credit report. Think about it for a moment: How many people have you turned away recently because of derogatory trade lines? Instead of letting them fall by the way side, why not start your own credit repair company and turn it into a profit!"
This is probably a true statement, based upon my personal experience with mortgage brokering, but the negative items on credit reports, if not inaccurate will not be removed and credit score improvement will not occur. In fact, an inexperienced individual attempting to correct an individual’s credit score, may in fact, cause credit scores to drop further. Yes, there could be incorrect information on your credit report.
"Think about it for a moment: How many people have you turned away recently because of derogatory trade lines? Instead of letting them fall by the way side, why not start your own credit repair company and turn it into a profit!
You will only be charged $200 for an entire 6 months worth of work - you are in control of what you charge on top of that. The average company profits approximately $500 per client. Whether you are planning on growing very big or keeping it small, you are in control over how much you make."
You can readily see that you pay $500 for the service and may not see an improvement in your credit scores!
A reputable loan officer or mortgage broker with experience in the Credit or Collection industry, can actually, guide you through the process, as well as, creating a roadmap for you to follow, that will result in higher credit scores. Your cost could be less than $20 for postage and some self-discipline with your monthly budget and spending habits. Some of the loan officers and mortgage brokers may have form letters for you to use by inserting your personal information and data!
I have worked with both real estate and mortgage clients where their credit scores were as low as 580 and within 120 days by correcting incorrect data from creditors (spent less than $20 on postage) and some better spending habits, their credit scores rose over 140 points to 720!
If you are thinking about purchasing real estate now or in the future, you should go through the pre-approval process rather than just pre-qualification. The pre-approval process includes a review of your credit reports, as well as, the review of paycheck stubs and bank statements. The pre-qualification process is only a series of questions with no documentation supporting any of the information you are supplying.
The pre-approval process is to your advantage, because if there are errors on your credit report, you have sufficient time to have the errors corrected - this can save you thousands of dollars in interest costs associated with your mortgage loan.
How can you tell if a credit repair company representative is knowledgeable? Ask them about the FCRA or FDCPA - the Fair Credit Reporting Act or Fair Debt Collections Practices Act. Here is a hint - use the initials rather than the name of the acts.
You can raise your credit scores with self-discipline and very little cost - and save yourself literally thousands of dollars with a lower interest rate on your mortgage, car loans or credit cards, lower auto lease payments, lower homeowners’ insurance premiums and possibly save your job or get a better job!
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