Notice: This article is for educational purposes only and does not purport to offer legal advice. If you need legal advice, please consult with a licensed attorney or other appropriate professional. This article does not necessarily reflect the opinion of the Bryan Ellis Real Estate Letter, Bryan Ellis, or WebWords Inc.
PLEASE close your wallet and listen carefully: Credit repair guarantees and promises to remove any or ALL derogatory credit information are definitely dangerous and potentially illegal.
As much as you may want to believe it’s possible, no person or company (not even a law firm) can remove accurately reported and correctly verified credit information.
NOTE: Outdated, time-barred and/or inaccurate credit information can be challenged and deleted (if that’s your preferred strategy) from Equifax, Experian and/or Transunion.
Regardless, credit repair guarantees and promises to remove ALL derogatory credit information are incorrect and legally problematic. Truth is, credit repair “opportunists” KNOW desperate consumers with bad credit buy on emotion, not logic. They KNOW desperate people turn off their brains & whip out their wallets, stepping forward to buy pleasure or remove pain.
Instead of credit repair, I call it CREDIT DISREPAIR – and these opportunists sell the dream, stealing desperate people’s money – causing legitimate derogatory disputes to be flagged as frivolous or (worse) uninformed consumers to be sued!
- Yes, you can be sued when a credit (dis)repair company blindly fires off template dispute letters challenging legitimately reported derogatory credit information.
- Yes, the BIG 3 credit reporting agencies can flag (even) legitimate disputes as frivolous, preventing you from disputing them again.
Beware Credit Repair Guarantees!
In fact, one particular BIG credit (dis)repair company calling itself a “law firm” generates more complaints than any other person or company contacting me. Desperate people think a law firm can & will fix their credit.
PLEASE do not open your wallet, if you see credit repair offers promising or guaranteeing to remove LEGITIMATE derogatory credit information, including:
- Bankruptcy
- Foreclosure
- Judgment
- Charge-off
- Collections
- Repossession
- Late payments
- Loan defaults including short sales
- Negative tradelines of any kind
- HELOC (i.e. home equity line of credit)
- Or any other negative credit information
Among the obvious credit disrepair traps include:
- The company wants you to pay for credit repair services before they provide any services. Under the Credit Repair Organizations Act, credit repair companies cannot require you to pay until they have completed the services they have promised.
- The company doesn’t tell you your rights and what you can do for yourself for free (see the FTC’s website)
- The company tells you they can get rid of most or all the negative credit information in your credit report, even if that information is accurate and current.
- The company advises you to dispute all the information in your credit report, regardless of its accuracy or timeliness.
Think before you act!
Credit repair expert Mike Payne helps people improve their credit and grab the keys to their new homes at http://www.fixmyuglycredit.com. Mike’s step-by-step, do-it-yourself credit improvement blueprint teaches people HOW to improve their own credit legally, effectively & finally. No dangerous gimmicks that risk legal peril for you. If you are contacted by a debt collector, please refer to your legal rights under Fair Debt Collection Practices Act and strongly consider consulting with an attorney who specializing in FDCPA.
Thank you for reading the Bryan Ellis Real Estate Letter. Please leave your comments & questions below.
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This article is very misleading, some “Credit repair” companies actually know the laws in place to protect consumer rights (Fair Credit Reporting Acts, Fair Debt Collection Act, Fair Billing Act, ETC). I have owned a credit resoration company for 8 years and nonsense articles like this have always gave the industry a bad name. If the company is legitimate then they should have more knowledge in consumer credit rights than the average Joe down the street. If a collection agency cannot prove their right to collect the debt the debt is not compliant to the law as per any other item that is on a credit report. That is why everything on a credit report must be “Accurate and Verifiable”.
The Credit Repair Organization Act known as CROA prohibits credit repair operations from collecting their fee up front but it is a double edged sword for a company to do work for credit challenged individuals then expect timely payments afterwards. My company charges a processing fee then after the first round comes back to the client the payments start. I believe it is the gravest injustice to etch in the minds that the credit repair industry is demonized where Equifax, Experian, and Transunion are cripling the American Economy with their non compliant information on consumers credit reports. Instead of constantly having these articles warning the public about credit repair, the efforts need to be creating a national class action law suit against these 3 publicly held companies that no one gave the permission to have files on private consumers, their information is not sworn to be accurate, and their data controls your economic livelihood, get some jobs, and even decide the rates you pay for auto insurance! Good Day
The very sad part about this is many people become desperate because of the big three credit reporting agencies, and the fraud they enjoy participating in.
It is time for people to become smarter all the way around, do more cash business, less credit business, and think about what they are really spending their money on. Most likely will not happen however, too many people are convinced they are owed the “right” to buy something immediately. Where is the sense in constantly buying on credit and adding anything from 10 to 30 percent to the purchase price? FICO scores are killing our country! Lack of AAA ratings will soon be killing our econonmy and way of life.
This is completely incorrect and I am shocked that you posted this as I am an avid reader of many of your informative articles I am a little shocked that you posted this without proper research. Here is what is wrong:
You stated: “The company wants you to pay for credit repair services before they provide any services. Under the Credit Repair Organizations Act, credit repair companies cannot require you to pay until they have completed the services they have promised.”
This would be true only if there were no “States” the CROA is the Federal Act and each state made their own provisions in their state finance law code. As a business you must register with the Secretary of State and receive a 10K surety bond prior to performing any Credit Repair Organization functions. You also must submit a copy of your bond as well as a copy of all contracts you will have your clients sign.
Here is an excerpt from Texas:
Texas Finance Code, Chapter 393
Title 5. Protection of Consumers of Financial Services
Chapter 393. Credit Services Organizations
Subchapter A. General Provisions
393.302. CHARGE OR RECEIPT OF CONSIDERATION BEFORE COMPLETION OF SERVICES.
A credit services organization or a representative of the organization may charge or receive from a consumer valuable consideration before completely performing all the services the organization has agreed to perform for the consumer only if the organization has obtained a surety bond for each of its locations or established and maintained a surety account for each of its locations in accordance with Subchapter E.
Here is Subchapter E:
Subchapter E. Surety Bond; Surety Account
§393.401. SURETY BOND.
(a) The surety bond of a credit services organization must be issued by a surety company authorized to do business in this state.
(b) A copy of the bond shall be filed with the secretary of state.
§393.402. SURETY ACCOUNT.
(a) The surety account of a credit services organization must be
held in trust at a federally insured bank or savings association located in this state.
(b) The name of the depository and the trustee and the account number of the surety account must be filed with the secretary of state.
§393.403. AMOUNT OF SURETY BOND OR ACCOUNT.
The surety bond or account of a credit services organization must be in the amount of $10,000.
§393.404. BENEFICIARY OF SURETY BOND OR ACCOUNT.
The surety bond or account of a credit services organization must be in favor of:
(1) this state for the benefit of a person damaged by a violation of this chapter; and
(2) a person damaged by a violation of this chapter.
§393.405. CLAIM AGAINST SURETY BOND OR ACCOUNT.
(a) A person making a claim against a surety bond or account of a credit services organization for a violation of this chapter may file suit against:
(1) the organization; and
(2) the surety or trustee.
(b) A surety or trustee is liable only for actual damages, reasonable attorney’s fees, and court costs awarded under Section 393.503(a).
(c) The aggregate liability of a surety or trustee for an organization’s violation of this chapter may not exceed the amount of the surety bond or account.
§393.406. TERM OF SURETY BOND OR ACCOUNT.
The surety bond or account of a credit services organization must be maintained until the second anniversary of the date on which the organization ceases operations.
§393.407. PAYMENT OF MONEY IN SURETY ACCOUNT TO CREDIT SERVICES
ORGANIZATION.
(a) A depository may not pay money in a surety account to the credit services
organization that established the account or a representative of the organization unless the organization or representative presents a statement issued by the secretary of state indicating that the requirement of Section 393.406 has been satisfied in relation to the account.
(b) The secretary of state may conduct an investigation and require information to be submitted as necessary to enforce this section.
Subchapter F. Criminal Penalties and Civil Remedies
§393.501. CRIMINAL PENALTY.
(a) A person commits an offense if the person violates this chapter.
(b) An offense under this chapter is a Class B misdemeanor.
§393.502. INJUNCTIVE RELIEF.
A district court on the application of the attorney general or a consumer may enjoin a violation of this chapter.
§393.503. DAMAGES.
(a) A consumer injured by a violation of this chapter is entitled to
recover:
(1) actual damages in an amount not less than the amount the consumer paid the credit services organization;
(2) reasonable attorney’s fees; and
(3) court costs.
(b) A consumer who prevails in an action under this section may also be awarded punitive damages.
§393.504. DECEPTIVE TRADE PRACTICE.
A violation of this chapter is a deceptive trade practice actionable under Subchapter E, Chapter 17, Business & Commerce Code.
§393.505. STATUTE OF LIMITATIONS.
An action under Section 393.503 or 393.504 must be brought not later than the fourth anniversary of the date on which the contract to which the action relates is executed.
So there are some of us who are actually trying to help and educate consumers that yes they can do it themselves and we are here yo help should you not have the time. Information like what you posted above may hurt the good guy for those reading this that dont know there own state law governing the CSO (Credit Services Organizations). Several states have a bonding requirement but most do not.
Good morning, I lost my house just recently thru a medication agreement to move out. It is a long story. I did have excellent credit back before I was let-go from only source of income (2006). After a few months of exhausting all of my finances and not finding a comparable job, I had to file BK ch.13 and then ch.7 (which wiped out the 2nd mortgage). I had to attend a mediation hearing in November. I have until May 1st to vacate this house (this is the final decision after Chase Bank tried to foreclose on my house illegally. I went to the court to file a vacate dismissal. That is when I got an attorney that litigated my case for the illegal foreclosure. Chase stated over and over again that they did not do anything, but there four counts against them. Finally, I will need to move out. I may need to find a legal rent-to-own company that help persons like myself as I would not deal with banks anymore (only thru CRE Investors). After a year of monthly payments (Lease), which shows payemt on my credit, my FICO goes up. I then can get a FHA loan and be a homeowner again…my question is whether this really exists or not. In reference to my credit, I happened to request a free credit report from the 3 bureaus. I noticed that on the Experian it showed 8 negatives, but 24 positives…what does that tell you. I need to dispute the other negatives so I can regain and start all over again.
Can you refer me info or to someone that will actually have a heart and help my predicament ?
Thank you and Happy New Year !
As a consumer advocate and attorney focusing in the areas of real estate, foreclosure defense and credit restoration services, I find this article one-sided and very misleading. It leads me to question the motives behind the article. Is it to educate or to sell a $27/month service which is free for the first 14 day trial period? While there are definitely scams in the industry, there are some very credible & legitimate companies out there and this article does not examine the industry as a whole.
For example, just because a credit line is legitimae does not mean that it was listed accurately. The Fair Credit Reporting Act (FCRA) is clear that anything that is outdated, unverifiable or inaccurate must be removed once challenged and not proven within the 30 day timeframe. As such, it is not an illegimate challenge even if the item is true because it may be listed over 7 years, etc. For more information visit the FTC website at http://www.ftc.gov under Consumer Protection then follow the links to Consumer Information.
The big issue here is that the article highlights “credit repair expert Mike Payne helps people improve their credit and grab the keys to their new homes at http://www.fixmyuglycredit.com” as a credible source despite the fact that his first “secret” revealed is to instruct people to become authorized users (“piggybacking”)which is the biggest scam noted by credit reporting agencies. In the world of foreclosure, loan modification and credit scams, I urge all readers to do their due diligence on all companies before paying your hard earned money including the “experts” highlighted in this article.
For what it’s worth, my valued subscribers: Mike Payne is the only guy I trust in the credit repair business. And I know a whole lot of them. Not sure who Teresa Martin is, and respectfully the fact that she’s an attorney doesn’t give her opinion any more significance to me than anyone else’s opinion. But I can say this: I’ve known Mike a long time, and I don’t know a single person who has ever gotten themselves in trouble following his advice. I can’t say the same for other credit restoration companies. FWIW. — Bryan Ellis
@Teresa R. Martin, Esq – Authorized User is a LEGITIMATE credit improvement strategy. It is NOT a scam. Fair, Isaac & Co tried to overlook AUs in its latest algo update called FICO ’08. However, consumer advocacy groups (perhaps you were not among such consumer advocates since you appear unaware) fought to keep AUs reported.
Most mortgage bankers do NOT consider AUs. If you followed me you would know I explain an AU should not be used to try to get approved for a mortgage. Rather, an AU is then a gateway strategy to get approved for personal credit, where otherwise people would get rejected.
They get approved and season their own tradelines. For most other credit approvals (such as car loans), AUs appear NOT to be discounted out.
By the way, I don’t know what you think you read or inferred but just because a credit line is legitimate does not mean that it was listed accurately. In credit repair, the most important ingredient is STRATEGY.
I’m glad to hear you are advocating on behalf of consumers, Teresa. Good luck to you.
Bryan I too have to agree with some of the comments on this is misleading and downright ugly article.
If this is a bash at Lexington Law then this mudsling ad is absolutely untrue–Lexington got my own scores up all over 700 in one year paying for the Concord Premier service at $59 a month–I consider this a bargain. I signed up as an afilliate and have helped 4 other people raise their credit scores thru Lexington which I have found to be a professional, courteous company to deal with…
Ralph Realtor Chicago
@Robert – You asked:
“I may need to find a legal rent-to-own company that help persons like myself as I would not deal with banks anymore (only thru CRE Investors). After a year of monthly payments (Lease), which shows payemt on my credit, my FICO goes up. I then can get a FHA loan and be a homeowner again…my question is whether this really exists or not.”
1. Legitimate rent to own (aka lease option/lease purchase) does exist. However, I strongly urge you to involve an informed real estate attorney. As I mentioned above, a law degree (unfortunately) doesn’t automatically mean the person is informed enough on rent to own (and Memorandum of Option) or foreclosure defense/prevention or real estate. In Florida, many scammers are advertising RTO opportunities on properties already in default or on properties they do not own. Further, most property owners in Florida are upside down and don’t want to take money to closing (in the future) to close with someone renting to own. My preferred option these days is to approach local real estate investors or property owners advertising For Sale By Owners and For Rent. I’ve found property owners who aren’t aware of benefits (to them) of lease optioning (especially if they’re sick of reducing their asking price). In Florida, many RE investors are flipping, not lease optioning. However, I found an occasional opportunity for a lease option.
2. What you mention about 1 year of positive rent payments and acceptable credit file USED to be approved for a “refi” mortgage. Today, I know of no mortgage banker approving such loans. Further, FHA/Fannie have instituted restrictions on buying after short sale (3 years) or foreclosure (7 years) with extenuating circumstances.
3. To build an alternative credit file, check out http://www.prbc.com. Rent payments traditionally are not reported unless delinquent or in default.
4. 8 negatives/24 positives also suggests you look carefully at each before disputing the bad. You also should examine the 24 positive. What is each? Is each active. Keep in mind credit card issuers stop reporting after 90 days of NOT using your card(s).
Briefly, these are a couple points to keep in mind, Robert. You definitely can improve your credit after BK (either 7 or 13).
@Ralph Vargas – I’m glad to hear YOU are pleased with LLF. If I were pleased, I too would be signed up as an affiliate since most people contacting me want to pay someone to fix their credit.
I do NOT fix people’s credit!
However, since you have mentioned LLF, some readers might be interested in hearing this about LLF (from the Utah State Bar):
http://www.fixmyuglycredit.com/blog/credit-law-repair-firms-lexington-law-firm/