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HomeMoney SavingBe Cautious of Companies Offering Credit 'Repair' Services

Be Cautious of Companies Offering Credit ‘Repair’ Services

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If you have a damaged credit score due to late payments or financial setbacks, you may be tempted by the promise of quick credit “repair” services. However, it is important to be cautious of companies that offer these services over the phone and charge upfront fees.

In August, the Consumer Financial Protection Bureau reached a $2.7 billion settlement with PGX Holdings, a group of companies, including Progrexion Marketing, that operated a large credit repair business under various brands. These companies typically flood credit bureaus with dispute letters in an attempt to have negative marks removed from credit reports. While their efforts may occasionally be successful, any positive impact is often temporary as lenders update the credit bureau with new information.

It is important to note that if the negative information on your credit report is accurate, there is generally no way to have it removed. Negative information such as missed or late payments can remain on your report for seven years, and personal bankruptcy can stay on for 10 years. Paying for credit repair services is often a waste of money for most individuals.

Consumers have the right to dispute errors on their credit reports and have them promptly corrected. It is recommended to handle this process themselves for free, rather than paying a third-party company. The Consumer Financial Protection Bureau’s settlement with PGX Holdings arose from a lawsuit accusing the company of collecting illegal upfront fees for credit repair services sold through telemarketing.

While the exact amount of compensation for affected consumers is uncertain due to PGX Holdings filing for bankruptcy protection, the bureau mentioned the possibility of using their victims’ relief fund to make payments to those harmed. As part of the settlement, the companies are prohibited from telemarketing credit repair services for 10 years and must inform customers about the settlement and the process for canceling the service.

It is important to be cautious when seeking help for credit-related issues. Nonprofit consumer credit counseling agencies can provide advice and assistance, including debt management plans that allow individuals to pay off their debts over time. However, it is essential to be skeptical of debt settlement companies that may encourage consumers to stop paying their lenders, potentially worsening their credit situation.

If you are unable to repay your debts and your credit is suffering, personal bankruptcy may be an option. However, this should be considered carefully, as it can restrict access to credit for a significant amount of time. It is advisable to consult reputable credit counseling agencies and explore other alternatives before considering bankruptcy.

You can search online at the National Foundation for Credit Counseling or check the Justice Department’s list of approved agencies for pre-bankruptcy counseling. These agencies often provide other services like credit counseling and debt-management plans.

Certain banks and credit unions offer secured credit cards that require a refundable cash deposit as collateral. Building a positive repayment record with these cards can improve your credit score and potentially qualify you for traditional cards with higher borrowing limits. Secured cards from Discover and Amazon are some examples. Additionally, “credit builder” loans provided by community banks and online lenders can help establish or rebuild credit.

To maintain a good credit score, it is important to pay bills on time and keep credit utilization low by not maxing out your credit cards. Regularly checking your credit reports for errors is also crucial. You can obtain free reports from the major credit bureaus through www.annualcreditreport.com.

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