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Is there a magic formula to repair your credit? The answer is No. And beware of companies that claim to have it. Don’t trust those agencies that ask you for money upfront to help you clean up your credit. In short, you can’t.
Having bad credit negatively affects various aspects of your life. Apart from not getting a loan or having sky-high interest on credit cards, it can also impact your ability to rent a home or even get a job. However, sometimes consolidating your debt into one loan can make things easier for you to manage and pay on time. You can find an online interest payment calculator to see how much a loan would ultimately cost and get a rough estimate on just how long it might take to pay it off.
Often, someone with bad credit is desperate to improve or try to resolve their situation. Unfortunately, evil people and companies are trying to take advantage of this vulnerability.
Advertisements for credit repair services offering to erase lousy credit or remove liens or unpaid debts from your credit file, all with guaranteed results, are prevalent. But the reality is that most of this advertising is false, and those who go to companies that offer these services can become scams.
“You have to be very careful. You don’t have to believe the promises that will save us from trouble,” says Rigo Reyes, chief of research and consumer protection for the Los Angeles County Department of Business and Consumer Services. “They use need and desperation to scam us and trick us into paying them money for a service that they will not provide.”
According to Federal Trade Commission (FTC), Hispanics are more likely to be victims of debt-related fraud but tend not to report it.
Can credit be repaired?
In short: no.
But you can correct errors in your credit file such as accounts, bankruptcies, or legal actions that are not yours, debts more than seven years old, unverified debts, incorrect dates, and misspellings in your name.
There are legitimate companies that offer “credit repair” services. But all they can do is review your credit files, report disputes, and follow up with the agencies that collect your credit information. That is, they do the same thing that you could do on your own. However, you can always do your research and find reliable insolvency trustees that are ready to help you with your debt and to create an actionable strategy that will actually help you.
We can make these corrections ourselves directly with the credit agencies without the need to pay someone,” insists Reyes. “And that is not repairing credit. That’s just updating our credit report because the information in our credit reports must be correct by law. ”
How “credit repairmen” cheat
In addition to charging a high down payment and monthly payments to supposedly fix a customer’s credit, many “credit repairmen” dispute accounts and debts even if they are real to make it appear that they resolve the problems from your report.
They do that maneuver because, by law, credit bureaus must investigate the dispute. While they do, they have to remove negative information from the report, explains Giovanna Gilliotti, a financial advisor at the Hispanic Center for Financial Excellence in Miami, a nonprofit organization. That helps Latinos with credit problems and provides financial education.
“But once the investigation is over and the original creditor shows proof that that consumer did have that debt, that information has to go back to the credit report,” Gilliotti says.
That happened to a Latino immigrant whom Gilliotti recently helped. A man went to one of these companies and thought they fix his credit problem, but he couldn’t buy a car. When Gilliotti checked his credit history to see what had happened, he came up with a dispute over a debt that had temporarily “cleaned” his credit.
“His credit score went down again, and when he wanted to apply for his car loan, they didn’t give it to him. Disputing accounts that you know to be true doesn’t help; it hurts the consumer even more,” he says.