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If you're desperate for ways to speed up the recovery process as you attempt to clean up your credit report, you may suddenly be looking at credit-repair companies as your last hope (even though you can repair your credit on your own). You may be asking yourself, "Why not?" Well, the answer to "Why not?" is this:
- Credit-repair companies can get you into a lot of trouble. Most credit-repair companies use one of two strategies. Their first strategy is to challenge everything on your credit report, or at least such a large portion of it that the credit bureau and the creditors will not be able to respond to their disputes within the legal time frame allowed. As a result, the items not verified will come off your credit report in 30 days. Sounds good, right? Not really. Although credit bureaus may be slow, they're tireless machines. So at some point in the near future, the information that was removed will be verified and it will reappear on your credit report. If you're thinking, "Yeah, but I can get a loan while the information is deleted," consider this: When the information comes back on your report, you can be considered to have committed fraud. Ouch!
Their other strategy is to establish a new identity for you, using an employer identification number (EIN). The idea is that, with your new identification, you'll begin to develop a good credit report and leave behind all the bad stuff. But savvy creditors usually see through this ploy when a credit report shows very limited or no activity. Some credit-repair agencies suggest that you use the EIN as a Social Security number. If you're able to pull this off, you'll get into trouble and find yourself facing all sorts of legal unpleasantness. Why? Because you've essentially established a false identity and gotten credit under false pretenses. Nice.
 | If you do what the credit-repair company tells you to do, and if any of it turns out to be against the law, you — yes you, your mother's favorite child — can be prosecuted! |
- Credit-repair companies have a terrible track record of delivering what they promise. Unlike credit counseling, which has also come under fire for having disreputable elements, credit repair is a much more recent phenomenon and the industry has not adopted independent standards of conduct. In fact, the industry has such a poor reputation that it has a very restrictive federal law named after it. The Credit Repair Organizations Act has as one of its two objectives "to protect the public from unfair or deceptive advertising and business practices by credit repair organizations."
- Credit-repair companies are expensive. Typically, the cost is at least $400. Chances are, if you're in a situation where you need help repairing your credit report, that money can serve you better by paying off some debt. If you're short on time and long on money with bad credit, why not hire someone to improve your credit for you? Certainly you could ask an attorney or accountant to help you through the process of improving your credit, but it will not be cheap.
Cleaning up your credit report is not as difficult as you may have heard. Erase the past? No. But you can make sure all the good stuff that may have been missed is added to your reports, that the old bad stuff is removed, and that no one else's information is on your report.
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