Use Caution with Credit Repair Offers
March 26, 2008
With so many people facing credit related problems it is no wonder that many are seeking help from credit repair companies. The Federal Trade Commission recently warned people to be careful when dealing with such companies and to be on the lookout for illegal promises.
Most consumers already know that many lenders are tightening up loan standards. In many cases, the loan decision is being based on the credit score more so now than it was last year, and many borrowers who are a bit shy on the score are turning to credit repair companies to get the score increased. For many of these borrowers the promise of a quick fix is the selling point. While this may end up with good results for some, many industry experts suggest that for most people it is often a waste of money.
Norman Magnuson of the Consumer Data Industry Association recently said: “Credit repair is sort of a pejorative term. This is because many credit repair agencies promise more than they can deliver.” The CDIA is a trade group that tracks consumer credit information.
The Federal Trade Commission says credit-repair scams are becoming very common with criminals, who charge high fees in advance and deliver only empty promises. “If they’re promising something, it’s illegal,” said Frank Dorman, an FTC spokesman.
As a primer on credit scores—a consumer’s score which is also known as a FICO score is the main determining value for eligibility to get loans. Today, with the tighter standards, consumers are finding it hard to get loans if their score is below 680. Credit scores range from 300 to 850, and the average score is about 692.