Step 2: Free Credit Repair Estimate

Category: Finance.

We have all heard the statement, "Credit repair is a scam! " You have read the negative news articles that state that you should stay away from credit repair companies, and that there is nothing a credit repair company can do for you that you cannot do yourself. Fortunately, there are a few simple things for you to know that will allow you to make an informed decision about enrolling in a credit repair program.

The reality is that there are some credit repair scams out there, and there are a lot of credit repair companies that are not scams, but simply do not do a good job for their clients. Let s begin by defining what is meant by the word scam. This is simply not the correct use of the word. There is a tendency for people to label everything they are not 100% satisfied with, as a scam. A scam is a deliberate and premeditated process of taking your money without delivering a stated product or service in the manner promised. I m going to explain the credit repair business models as used by nearly every credit repair company in existence, and I think you will see and understand why there is so much negativity press around credit repair.

I can tell you that as far as credit repair goes, most of what is being called a scam is really just a poorly designed or improperly managed business. Below are the two most common models for a credit repair company. Step 2: Client is then instructed to order their own credit reports by mail or online and send them to the credit repair company directly. After each one, I will go over the problems associated with it, I will show, then you, what I believe to be, a better way: Model 1: (this is the most common credit repair company business model) Step 1: $50- $200 is charged as a Setup fee and the client agrees to an additional$ 20- $75 per month service fee. Step 3: Credit repair company receives client s credit reports and begins first disputing cycle( usually 30- 45 days) . Client must review and mail them back to the credit repair company for work to continue.

At completion of cycle, the credit bureaus will mail updated credit reports to client. Problems with model 1: First of all, the number one problem is that the client has paid money before any services have actually been performed. So, my biggest question is what is the justification for the setup fee? The credit repair company will not do any work until you have sent in your credit reports. The monthly fee is also questionable because whether you send in your updated reports or not, they will still continue to charge you a monthly fee even though they did not do anything for you. The Federal Credit Repair Organizations Act( CROA) clearly states that a credit repair company can only charge for services that have already been performed.

The bulk of complaints against credit repair organizations state that the consumer was charged for services, but those services were not performed as agreed. If this is the case, why are all these companies charging before they actually perform services? It is a technique that they are currently getting away with. Located in the fine print of most of the credit repair company contracts it is stated that the monthly fee is being billed for services performed the month prior. This has not gone unnoticed by government and state officials. Another problem is that many clients have difficulty obtaining their credit reports.

In fact, many credit repair companies have been shut down and fined in the past few years, but it seems that kind of action requires a large number of complaining clients. Most consumers are unaware of all the different versions of credit reports that are available today online. There are a variety of reasons the credit bureaus make it difficult to get your credit reports directly. The most effective credit reports for credit repair can only be obtained directly from Equifax, and Transunion, Experian. Often clients will simply give up without even getting their reports, and now have to attempt getting their money back that they have already paid to the credit repair company. This is payment in full for services that have not yet been performed.

Model 2: Step 1: A one- time service fee of$ 300- $2, 000 is charged upon enrollment. Step 2: Client is instructed to order their own credit reports by mail or online and forward them to the credit repair company. At completion of cycle, the credit bureaus will mail updated credit reports to consumer. Step 3: Credit repair company receives client s credit reports and begins first disputing cycle( usually 30- 45 days) . Client must review and mail them back to the credit repair company for work to continue. This is directly against the federal guidelines for how a credit repair company is to operate. Problems with model 2: The main problem here is that you are paying in full for services that have not been delivered yet.

Often this is how small credit repair companies operate simply because they do not have enough operating capital to operate any other way. When it comes to a company of this type it is" buyer beware" . This means that if they do not perform services to your satisfaction, and you ask for a refund, you may discover that they simply don t have the money to refund you. Also note that once they have your money, there is no longer a lot of motivation for them to continue the work on your credit reports. How long are they willing to work on your case? Are they going to be devoted to the follow up neccessary to make sure you received your updated reports?

Often their fine print states they will only work on your case for six months. Here Is A Better Credit Repair Model: Now I will share with you a much better way of working with a credit repair company. If you are not prompt about sending in your updated reports, this may simply not be enough time for you to see the kind of improvements you are looking for. This puts the client first, and the entire burden is on the credit repair company to produce results before they earn any payment. This can be done over the phone in a few minutes, but allows for a client to determine if a credit repair program is even appropriate, get some advice about their credit, and get assistance obtaining their reports from each of the three credit bureaus. Step 1: Free Consultation and Credit Evaluation.

Step 2: Free Credit Repair Estimate. It is clearly laid out so that the consumer can see that they will only be charged if and when a negative item is corrected or deleted. The client s credit reports are reviewed and an estimate for services is provided. There are no other fees of any kind. After a client has approved a credit repair estimate, is the payment arrangement setup. Step 3: Program Enrollment, and Begin Services, Payment Setup.

This is a progressive, performance- based payment model. Fees are only earned when the credit repair company corrects or deletes a negative credit item. The client makes automated deposits into a deposit account to cover any earned fees during the course of the program. If no credit items are fixed, the credit repair company does not earn any money, and the client is refunded the entire balance of the deposit account if and when they choose to cancel their program. The client is litterally walked through each step. Keep in mind that since the credit repair company assisted the client in obtaining their credit reports, they are ready to get started with the services immediately upon approval of the estimate.

An additional note about Licensing and Bonding: Currently, there are only a few states that require a credit repair company to be licensed and bonded, so most credit repair companies are not. They have also been required to put up collateral, or show significant business capital to ensure that they can be held accountable for their client s money. The advantage of working with a company that is licensed and bonded is that they have passed a set of operating guidelines set forth by both the state in which they operate, as well as the insurance company that has bonded them. Understanding how most of the credit repair companies operate, My suggestion would be that you only work with a credit repair company that is licensed and bonded. As you can see in the last model explained, everything is centered on the client s needs, and requires good communication with the client throughout the program for fees to be earned. In my opinion, this is the only way to run a credit repair company. It puts the motivation on the company to provide excellent services, instead of on the client to make sure the company is doing what they are supposed to do.

However, doing right by your clients will ensure a long- standing business, and a steady stream of referral clients. In my years of business, I have yet to locate or hear of another company operating in this manner, and am sure the reason is because it is substantially more difficult and less profitable from a company perspective. If more companies would take this responsible approach, there would not be so many claims of scams. Now that you have this insight into the credit repair business, you will be able to make a more informed decision about the credit repair company you choose.

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