Credit Repair

Depends on what they mean by credit repair. I used to work as a CSR for a credit counseling agency and I found out that the only way to really repair your credit is to pay off your debt and get it wiped off your credit report. Also those credit reports only show the past seven years of your credit history, so you can sort of wait it out, EXCEPT the creditor has the option of extending the debt for another seven years if they have any intention of collecting. Usually they will just let it go and write off bad debts, but they have the option to keep it on the books.

If some of your debts has gone to a collection agency then something might be worked out. BUT there is a difference between a collection agency buying a debt off a creditor and a collection agency handling the debt collection for a creditor. If the CA has bought the debt then you can probably settle it for a smaller percentage of the debt and have them wipe it off your record. They already bought your debt from the creditor for pennies on the dollar and will just be happy to make money off the exhange.

If however the CA is just handling the account for the creditor, then don't even bother paying them the money. Try to deal directly with the original creditor because they are the only ones that have the autority to expunge the debt from your record. And the CA would be taking their cut out of the top anyway so a bunch of your payment wouldn't even be going towards paying off your debt.

Basically you will want to get a copy of your credit report to see where you stand financially. So you can find out who currently owns your debts and whether some have already been wiped out by the passage of time.

Oh and another thing to mention, if you do pay off your creditors at a fraction of the total, it's important to make certain that they are going to put it down as a "zero balance" on your credit report. If they are just going to put down the rest of the amount that you owe on the credit report but not bother you about repaying it, then that doesn't actually help your credit score. It gets them off your back but it doesn't address your primary concern. But the creditor won't usually give you a "zero balance" unless they're already cut bait on your debt. In that case you probably just have to suck it up and pay all off if you want it gone from your report.

Back to your original question of credit repair services. I believe taht you're talking about guys who find out where your debts are and try to pay it off for a fraction of the total. This is something that you could do yourself, but they have more practice with it. And like I said, it is important to find out how your payment will be reflected in your credit report. If these credit repair companies are just paying guys off to keep them off your back but leave a balance intact on your credit report then they would be a scam.

Credit counseling which I have more experience with is basically a nonprofit service that negotiates a payment plan with your creditors. The Credit counseling agency can usually get the creditor to re-age (bring it up to date) the accounts and give you a break on the interest. But you are basically paying it off in full. The downside of credit counseling is that it does hurt your credit score a little. But it's definitely better than not paying your stuff off. The breakdown goes like this:

Best: Paying off your debt in full or a fractional payoff where they still agree to mark it as paid in full (not usually possible but you never know).

Good: Paying off your debt with the help of a credit counseling agency.

Not Good: Paying off your debt but leaving a balance on your credit report.

Bad: Not paying off your debt.

But first things first. Get a copy of your credit report. This will help you a lot in determining what steps you have to take. Not sure where you can get one in Houston (or whatever city you live in) becaue I don't live there. And there are places online that say you can get a free credit report, but those DO sound like scams (like maybe as a front for selling you a subscription service to check your credit report which you probably don't need).

Once you get your credit report and find you that you DO need help then you should probably set up a free consultation with either a credit counselor or one of those credit repair outfits. Listen to what they have to say and bring up the concerns that I've listed to see what they can provide. I'm by no means an expert, but I do think I have brought up some legitimate concerns and options that you will need to deal with in cleaning up your credit history.

Good luck.

 

This is great information.

 

Don't do a free credit report online. You don't get it in seconds, you ave to sign up for a subscription to a credit watcher thing, and you have to wait 2-3 weeks to actually receive it and by that time they'll probably charge you for your first month of the credit watcher.

 

The only way to "repair your credit" is by paying off your creditors. Don't let anyone tell you any different. Some of these companies who claim to be able to "erase" your bad credit do it by actually jacking with your social security number. They're scams and they can get you in more trouble than it's worth.

Your best bet is to pay off your creditors asap. If you can't afford to do that, get set up with Consumer Credit Counseling Service. They will help you pay off your credit cards and give great advice on fixing your credit the RIGHT way. It only costs something like $20 a month. Other companies want to charge as much as $200 a month. Many creditors will see that you're on CCCS and view it as a positive because they see that you are doing something about your bad credit.

After you've paid all your cards off, get a gas card or a credit card with a small limit ($500 or less) and pay it off IN FULL every month. That will re-establish your credit.

I did all this 4 years ago after having HORRIBLE credit and I just bought a house. Good luck.


EDIT: One more thing. Read m_cable's post twice!

 

This is known as re-aging and is illegal ~ some of your points are a little off the mark.

 

I might also add, somebody asked a question on Ask Yahoo! about building better credit and Yahoo! gave some good points here.


The Federal Trade Commission offers a PDF report on "Building Better Credit" at this website.

 

I think what he meant was that at the end of the seven years they can sell your debt to another collection agency. As a former loan officer writing b through d grade loans, I saw this frequently. Once the new agency buys the debt, it can go another seven strong.

 

They probably are. Like I said, I only worked as a Customer Service Representative for a Credit Counseling Agency, so I don't know all the ins and outs. But I do remember the Counselor telling me that I shouldn't tell people that after seven years the debt will be gone. He said it's was misleading, because the creditor could extend the timeframe. Maybe I misunderstood or whatever.

Definitely don't hold me to everything I said. I explained what I knew as well as I could, but people need to speak with professionals before they take any action.

 

If you're getting your credit report, I would go here instead of any of those "free credit report" sites. You can view it online and they will also send you the official copy for all three reporting agencies.

Also a good place to research everything financial is www.fool.com. Lots of good info.

 

Please don't think i'm being too critical your advice was solid ~ there are just a few things that could be fine tuned so to speak.

 

So do I understand that correctly, that if I had not paid a phone bill (because I thought it was largely incorrect) in 1996, my credit should be fine by now, unless someone bought the debt (which I guess would be unlikely in this case...)?

 

Can anybody report you to a collection agency? I mean if I owe my friend $5 bucks and don't pay it back for a year could he report me?