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Resist the quick credit fixes

Despite several years’ worth of warning and repeated advice from officials of all stripes, companies offering “credit repair” continue to abound.

There are steps you can take if you are in financial trouble that can one day help you improve your profile to potential creditors. But a credit score is part of your financial picture, not the entire picture. An improved credit score should be the effect of you meeting your goal of creating a financially responsible and secure life, not the goal itself. 

It’s understandable why someone would be tempted to buy into a quick-fix program. Credit scores not only affect your ability to borrow, they can have a negative impact on insurance rates and can influence utility companies to ask for high deposits before agreeing to provide you service.

The problem is that companies offering you quick fixes often will do so using techniques that can change your overall score at least temporarily, but they do so by relying on weaknesses within the credit reporting system that end up creating a false history.

For example, if your credit report shows that you have made several late payments to creditors, a credit repair company might write letters to each credit bureau challenging the accuracy of those records. Anyone who wants an accurate credit report ought to work to correct mistakes, but oftentimes that’s not where credit repair companies stop. They also seek to correct records that are there legitimately.  When a record is disputed credit companies have a limited time to respond. If they don’t, the record will be changed.

The Federal Trade Commission suggests five ways to detect a credit repair fraud. A disreputable credit repair company:

  • Asks for payment before doing any work.
  • Tells you not to contact the credit reporting agency directly.
  • Encourages you to dispute accurate information.
  • Tells you to give false information on a credit application.
  • Doesn’t explain your legal rights.

The two elements required for an improved financial situation are time and new spending habits. You will do more to improve your relationship with money by budgeting, creating a new outlook on credit and saving than anything you do that focuses solely on your credit score.

As you consider your options in improving your financial picture, talk to a credit counseling company, such as American Financial Solutions, that can offer you a number of ways to address the situation you are in. Most solutions are free.

If you follow sound steps to improving your finances, you will feel the security of being in control of an important part of your life. And in the end you will approach credit in a way that won’t leave you overwhelmed and looking for quick fixes out of a mess.

Published Feb 21, 2014.