I’m thinking about buying a house, and recently I hit a couple of internet mortgage sites to see what sort of mortgage I could qualify for. One mortgage company has shown particular interest in me; I’ve gotten several e-mails from one of their associates. Clearly he’s interested in a nice commission, but that’s neither here nor there.
I was up-front in my e-mails with this guy about my poor credit history, and his response was what I expected: I’ll need more references, pay a higher interest rate, etc. But then he said something that shocked me: he said that his company worked with a “credit doctor” who could repair my credit for some fee (like $250 or something) or that of myself and my wife together for a higher fee (like $350 or something).
Immediately red flags went up in my mind, as I’ve heard that there is absolutely, positively, NO SUCH THING as credit repair; that the only way to repair one’s credit is to slowly, over the course of several years, satisfy old debts and establish new credit.
So is this mortgage agent trying to get me into a scam, or is there some sort of legitimate credit repair out there?
You’re correct, the only way to repair one’s credit is to pay off your debts and re-prove yourself to be a reliable credit risk. As I understand it, companies who offer “credit repair” services basically bombard your creditors (based on the negative credit items on your credit report) with disputes/inquiries. While the disputed item is in review, the creditor is required to remove it from your report. I think that what happens is that while all of your negative items are in review and off the report, they try to issue you credit during the window of opportunity where your credit appears to be good. Also, some creditors will never respond, and if they don’t respond, the item has to stay off of your report.
You’re right to be suspicious, IMO. Sounds like this mortgage company is so hot to get your business that they’re willing to go to unsavory methods to get you approved.
FWIW, in Ireland (where I presume you don’t live) your credit history is kept by Credit Agencies. If you apply for credit to a bank, assuming that that particular bank doesn’t have a previous negative history of you, the bank will query the Credit Agency databases. You can pay to have your name and negative credit history removed from these databases.
However, this will only remove a negative mark from your name - it will not invent a “good” credit history. Again, assuming that your not applying to the same institution that you had problems with in the first place, you then offically have no credit history.
This is not exactly ideal either - when a bank are looking at the credit rating of a particular customer, they take his or her transactional history, debits / credits, loans / repayments, earning potential et cetera all into account. If no-one has any info on you, then your starting out blank - which is pretty much what happens after 5 years in Ireland anyway, as the credit agencies have to delete their files on you after that period.
So, not really money well spent. Unless you were declared bankrupt, or some such disaster, which is probably unlikely.
You can sometimes fix your credit legally.
Most people who want to take your money to do it for you will either A) do nothing at all or B) do things you could do for yourself.
Easiest, Most Legal Way:
Pull your credit report.
If any negative items are untrue, dispute them with the credit agency.
If that doesn’t work, threaten the creditor (or whoever reported the item) with lawsuit.
Next Most Easy and Legal Way:
Pull your credit report.
Have any outstanding debts on there? Offer to pay them, but only in exchange for a signed non-disclosure agreement from the creditor.
Pay them.
Once the items have been paid, dispute the item as inaccurate. This will be legal… after all, it’ll briefly be reporting as unpaid when it is in fact paid.
The creditor is legally bound to not respond to inquiries from the credit reporting agency about your item once your NDA has been accepted.
If the CRA verifies the existence of the account, find out who they verified with. If the creditor verified it, sue them for breach of contract. The creditor would rather get that item off your report than pay damages in your suit, so this item will come off of your report.
If the CRA fails to honor your dispute but doesn’t even contact the creditor (this happens more than you’d think), then sue the CRA. You’ve got a valid case. Rather than go to court, they’ll probably pay you some cash AND delete the negative tradeline.
There are other tricks. I learned most of the ones I know on www.creditnet.net. under the Discussions area.
And if you really want to pay someone to do this, I’d reccomend http://www.lexingtonlaw.com
They will get your creditor report changed, one way or the other. They aren’t scammers. However, sometimes mistakes happen. I read a testimonial (NOT on their site) where not only did Lexington Law Firm remove all of a gentleman’s negative credit items, they also removed all of his good ones.
In fact, on www.creditnet.com I read MULTIPLE stories just like that.
And as far as I can tell, lexingtonlaw.com is the best service provider out there for credit fixing.
Side Notes:
There are some easy to defeat heuristics in the credit scoring system.
The system prefers no more than one credit card with a balance.
The system prefers you have no more than 1-2 credit cards.
The system prefers that if you HAVE credit card balances, you use no more than 30-40% of your balances.
Taking any one card from 49% usage to 51% usage is likely to substantially hurt your score. Sounds stupid, but do some experiments, you’ll find out I’m right.
The more inquiries you’ve made for credit in the last 12 months, the worse your score gets. 1 inquiry in the last 12 months is the best number, followed by 0, then it gets worse as your inquiries rise. This hurts more when you have real good credit than when you have real bad credit. If you had an 800 (850 pt scale here, remember kids), you might lose 30 points just for applying for one credit card.
The newer your credit cards/loans are, the worse you look.
The longer you’ve been in the “having credit” world, the better.
A paid collection item hurts your score just as bad as an unpaid collection, but you’ll rarely ever get a loan without paying the unpaid collection.