There is no shortage of signage around Metro Detroit offering to “repair” your credit for a low, flat fee. On highway embankments, hand-scrawled on cardboard in aging office building windows, cluttering Craigslist …
If these advertisements are correct, making negative credit reporting magically vanish is so simple that anyone can do it. Even a former plumber. Even a realtor.
Can they really do it?
Such offered services too frequently mask a process of victimization of desperate consumers who have missed installment payments, suffered repossession or foreclosure, been sued, garnished, had a job offer withdrawn because of bad credit.
Even under circumstances like that, many people feel an instinctive repulsion at the idea of filing for bankruptcy.
They want to avoid bankruptcy, but they also want good credit. As quickly as possible.
Too good to be true?
You know what they say about things like that.
CREDIT REPAIR BEFORE BANKRUPTCY: DISPUTING ACTUAL INACCURACIES ON YOUR CREDIT REPORTS
You do have the legal right to dispute inaccurate, mistaken, or fraudulent information on your credit reports without paying anything to anyone else to do it.
It is possible that some companies or individuals claiming to be able to fix your bad credit are referring to the legal ability to dispute inaccurate reporting.
If this is all they are offering AND they are not charging you a fee in a manner contrary to law (see below), they may not be operating in a fraudulent manner.
The odds aren’t good, however.
Regardless, the underlying problem is that they are charging you money to do something that you can do yourself, that isn’t all that difficult, and which they cannot claim to do any better than you yourself could without their assistance.
To dispute something on your credit report that you feel is not accurate, visit the websites of the 3 major credit bureaus—Transunion, Equifax, and Experian—and follow the suggested steps for filing a dispute.
The Federal Fair Credit Reporting Act requires the credit bureaus to forward the matter to the reporting creditor. The creditor must then respond to it with documentation supporting its negative event reporting, or it must correct the error.
It’s that simple. No need to pay any money to anyone.
CREDIT REPAIR BEFORE BANKRUPTCY: GENUINELY NEGATIVE CREDIT REPORTING
If you actually have bad credit and no fraud or inaccuracy is involved, nothing that any third-party service can do will fix it for you.
Many of these alleged credit repair service providers essentially file scattershot disputes on your behalf for all of the negative credit events on each of your credit reports.
This is not only illegal, it is also, in the long or short run, ineffective for the following reasons:
- The disputes will ultimately not bear out. A creditor who has legitimately reported your late or missed payment or default will, generally, be able to provide sufficient response to the credit bureaus to refute your claim.
- If the credit reporting agency suspects the dispute is frivolous, it is not required to respond to it at all.
Only time and some basic steps that you yourself must take to rebuild your credit will have any positive effect.
Beware of anyone advertising anything to the effect that bad credit can be “erased” or that bankruptcies, judgments, missed payments, late payments, or other negative reporting can be “removed”—especially with any guarantee.
The Federal Credit Repair Organizations Act and the Michigan Credit Services Protection Act forbid any “credit repair agency” from the following:
- Charging you any money before its offered services are fully completed;
- Advising that you dispute all of the information on your credit reports regardless of whether it is accurate or not;
- Claiming that it can rid your credit reports of negative information;
- Suggesting that you create a new credit identity by applying to use an EIN instead of a Social Security Number.
In addition, the Federal Trade Commission (FTC) has launched an initiative to crack down on credit repair scammers, and multiple class-action lawsuits have been filed against alleged “credit repair” companies.
HOW BANKRUPTCY CAN LEGITIMATELY IMPROVE YOUR CREDIT
Our prior post on this Bankruptcy Blog discusses in detail the over-emphasis people place upon their credit scores to begin with, as well as the impact of a Chapter 7 or Chapter 13 bankruptcy filing upon not only your credit but also those of co-debtors.
Long story short, however, filing a Chapter 7 or Chapter 13 bankruptcy has immediate and legally weighty effect upon your credit reporting.
First, all collections activity must cease upon filing the bankruptcy case. No further lawsuits, garnishments, late or missed payments, or other negative reporting events will populate your credit reports.
Upon discharge of your bankruptcy case, all pre-bankruptcy accounts will be closed and must be noted as such. Not “past due” or anything else. Simply: “Closed, discharged in bankruptcy.”
Once even those accounts reach Michigan’s 6-year statute of limitations for collection after your bankruptcy is completed, they will disappear from your credit reports entirely.
Thus, in contrast to the dubious flurry of frivolous disputing offered by credit reporting agencies, a bankruptcy filing, proceeding with the teeth of Federal law behind it, will truly, in time, fully remove your pre-bankruptcy negative credit reporting (with the exception of certain debts not dischargeable in bankruptcy).
CREDIT REPAIR COMPANIES: THE BOTTOM LINE
The bottom line with regard to any decision to hire someone to “repair” your credit is caveat emptor: let the buyer beware.
While bankruptcy carries an unfounded stigma, it is a legal process that can actually guarantee the results that it promises.
Attorney Walter Metzen has represented thousands of consumers in Chapter 7 and Chapter 13 bankruptcy cases in Michigan. A Board Certified Bankruptcy Expert, Attorney Metzen has obtained solid debt relief for consumers for over 30 years.
The Law Offices of Walter A. Metzen & Associates offers free consultations for those interested in the bankruptcy process and is experienced in determining and advising as to the best course of action when filing a Chapter 7 or Chapter 13 bankruptcy in Michigan.