Questions to Ask Before Signing Up for Credit Repair

When you are researching various credit repair companies, one of the best ways to gauge their responsiveness, professionalism, and knowledge is to talk to them over the phone. Reading through their company websites or other marketing materials can give you a good start on learning about the company, but a live interaction with a real person can provide insight that you won't get from the carefully constructed messaging of other mediums. Getting someone on the phone will also give you the opportunity to lead the conversation (as opposed to being a passive reader) and get answers to any questions you have.

To help you get the most out of your time on the phone and put yourself in a position to choose the best credit repair company for you, here are a few questions to keep in mind when shopping for credit repair.

How will you get copies of my credit reports?

In order to effectively repair your credit reports, a credit repair company is going to need to know exactly what information they contain now and for the duration of the time they are working for you. Having an updated copy of your credit reports is a key to an effective credit repair program. Make sure you know how the credit repair company plans to accomplish this since many times they will be counting on you to help them out. By not making sure a credit repair company has updated copies of your credit reports you are not only limiting the effectiveness of their service, but in some cases may be voiding any contractual warranties or guarantees.

There are a few ways a credit repair company can get copies of your credit reports. One of the most common is to simply get a copy of it from you. Then, as they work to clean up your reports, updated copies of your credit reports will be sent directly to you that you will in turn forward along to the credit repair company.

Other methods of getting your credit reports include helping you order them online via AnnualCreditReport.com, ordering your credit reports through a pay service like FreeCreditReport.com, or in some cases ordering credit reports directly from the credit bureaus.

A couple of methods of procuring your credit reports that you'll want to watch out for is ordering them under false pretenses or through an unrelated third party. Some credit repair companies either pose as lenders or work with other lenders to pull copies of your credit reports as if they were doing so as part of a credit application. While you could argue that this makes it easier for people to get help with their credit and doesn't cause much harm (aside from a hard inquiry on your credit report), it is likely a violation of the Permissible Purposes section of the Fair Credit Reporting Act and could land the credit repair company in hot water. In fact, not too long ago, one of the largest and most successful credit repair companies in the nation was shut down because of the way it was getting customers' credit reports. They may have made it easy for customers to get started with their credit repair services by pulling credit reports for them, but for all the people who signed up for the service only to have the company disappear, it certainly wasn't worth the convenience.

Which negative items will you dispute?

This is a bit of a trick question. The correct answer should always be, "only the items you tell us to".

Whether through a genuine desire to make things easy for you, to make their systems simpler to manage, or through negligence, many credit repair companies will simply dispute all of the negative items on your credit reports. This is dangerous for a number of reasons. First, and most importantly for you, there are some negative items that you probably won't want disputed. For example, disputing an unpaid collections account can stir up all sorts of problems. When the collections company (who has probably ceased efforts to collect the debt) learns about your interest in improving your credit score, they may renew their collection efforts starting by updating the negative listing which has caused some people's credit scores to drop. Also, knowing that most people care most about their credit score when they are looking to make a major purchase, the collection company can assume that you now have money to spend. Their harassing calls may start up again and you may even find yourself being sued.

You need to be careful of the derogatory listings on your credit reports you are disputing whether you are using a credit repair company or working to repair your credit yourself. A good credit repair company should keep you informed of these risks and should never blindly dispute every negative item.

A second reason to avoid a company that disputes everything is that it may be a violation of the Credit Repair Organizations Act (CROA). While we are not aware of any credit repair companies who have been sanctioned solely because of it, CROA prohibits credit repair companies from making any statement to a consumer reporting agency that through exercise of reasonable care they know is untrue or misleading. In other words, a credit repair company shouldn't dispute any negative items with the credit bureaus that you feel are 100% accurate, something they could only know if they consulted with you first.

Do you dispute with my creditors as well as the credit bureaus?

Credit bureau disputes are easy and can be quite effective. There are only a few major credit bureaus and the rules behind credit bureau disputes are relatively simply. This is why every credit repair company we have researched offers credit bureau disputes, some of which only offer credit bureau disputes.

For a lot of people, however, credit bureau disputes will not be enough to help them achieve their credit goals. Credit bureau dispute are slow, they will not be effective at removing all negative items, can have negative repercussion if used on certain types of negative listings, and should not be used at all for negative listings that are not inaccurate. A more holistic approach to credit repair is usually necessary to get the best results in the shortest amount of time.

Along with basic credit bureau disputes, the most effective credit repair solutions also incorporate tactics like goodwill letters, debt validation services, information requests, negotiations for deletions, and so on that can only be accomplished by working directly with your creditors along with sending disputes to the credit bureaus.

Make sure you know what services you are receiving. In some cases, credit bureau disputes are all that you will need, but you should expect to pay much less for this stripped down service. If you are paying a premium price, make sure you are getting a premium credit repair service.

When and how much will you bill me?

Most people will make it a point to inquire about how much a service costs. After all, price is one of the deciding factors when selecting a credit repair service or just about any other type of service. Something else you will want to get clarity on is when you will be billed for services.

Because of CROA, credit repair companies are required to bill customers in a certain way. Section 404 of the Credit Repair Organizations Act states that no credit repair company can receive "money or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform for any consumer before such service is fully performed." As a result, most credit repair companies have opted to either bill according to a monthly fee model or a per deletion model.

Something you should watch out for are companies that want you to pay in advance for credit repair services. A common trait of a credit repair scam is to demand full payment upfront before they will begin work. Many people have sorely regretted doing so when a few months down the road little or nothing had been done to repair their credit and the credit repair company was either hiding behind the excuse that credit repair isn't foolproof or had disappeared entirely. The most common billing model among the largest credit repair companies operating today is the set up fee plus monthly fees model. When you sign up for these companies' credit repair services they will typically start the process by creating an account for you within their system, processing your credit reports, determining which negative items to dispute, and in some cases sending out a first round of dispute letters. This process, along with a required right of cancellation waiting period, can take up to 5 days or more only after which you should be billed the set up fee. Then, you will be billed on a monthly basis for credit repair services provided during the previous month's period until the service is cancelled.

How does your guarantee work?

Guarantees in the credit repair business are difficult because no credit repair company can really say with 100% certainty that they will be able to remove something from your credit reports. At best, a credit repair company can give you some sort of consideration if they are not able to perform to a certain level such as some money back or free additional services. But as you would expect, with a service as unpredictable as credit repair, many companies that offer warranties or guaranties take care to protect themselves in their contracts. So before you move ahead with a credit repair company because they offer 100% money back or even $10,000 in cash if they don't repair their credit, make sure you understand all of the terms involved. Below are some of the typical clauses in a contract regarding guaranties:

1. By not providing updated copies of your credit reports in a timely manner, you void all warranties. This makes sense because in order for a credit repair company to get the best results, they need current credit reports. But be careful because if after 8 months of ineffective service you forget to forward a credit report on time, you may accidentally forfeit you ability to get any of your money back and not just you most recent month's payment.


2. Removing a single negative item from your credit reports constitutes repairing your credit. This is a typical clause in those "too good to be true" warranties. You may think it is a win-win situation going with a company that offers you a truckload of money if they don't repair your credit report since you are either going to have good credit or a fat bank account, but there is a good reason why these companies never or almost never have to pay out (depending on who you talk to). All they have to do is get a single inquiry removed from your credit report which will at best imp-rove your credit score by around 2 points and they have contractually "repaired your credit". Considering that these companies charge hundreds of dollars for their service, what seemed like a win-win now definitely feels like a solid loss.


3. You must stay with the program for a year to be eligible to get any money back. This is another clause that makes sense for the credit repair company because credit repair does take time, but you should definitely be aware of it before signing up for a service or before canceling a service. If after 10 months you decide that a credit repair service is not working for you, it may make more sense to pay for two months of less than effective service in order to qualify for a money back than to cancel immediately and risk forfeiting everything paid so far.

How do I cancel the credit repair service?

Most credit repair services are on a month by month basis until your credit reports are 100% clean or until you decide to cancel services. Most people will end up canceling the service before their credit reports are squeaky clean because there becomes a point of diminishing returns. Usually, credit repair is most successful at the beginning and then loses effectiveness as only the stingiest negative items are left on your credit reports. At that point, it no longer makes sense to contine paying for the service as the costs outweigh the benefits.

Depending on the company, there are a variety of accepted methods to cancel your service so you'll want to know which ones are available to you. The last thing you want is to get billed for a service you no longer need, want, or can afford so make sure you are aware of what you will need to do in order to terminate the service. Don't be caught off guard when you send in an e-mail to cancel service, get a response back the next day stating that you have to call in to cancel over the phone, are not able to get a hold of anyone because it is after hours when you get the response, and before you know it, you have been charged for another month's worth of services.

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