Do I have your attention? Good! After servicing more than 8000 consumers, I have pinpointed the glaring reasons why credit repair is effective for some and not for others. Today I am going to share my findings with you in the effort to provide clarity and understanding on an industry wide scale.
Let’s start with the obvious or stereotypical reason why credit repair is believed to be a waste of time and money: poorly provided service. With the low barrier to entry to be a credit repair organization or CRO, many individuals flock to the industry to try and profit from others misfortune. Without being careful, you can fall victim to a “bad actor” and have nothing more the generic disputes blasted over and over to the credit bureaus.
Letter jamming and outsourcing to dispute facilitators are the two most popular credit repair processes. This is a generic and sometimes illegal process of auditing a credit report. This type of servicing also is a leading factor why the FTC, CFPB and credit reporting agencies lean so heavily against credit repair.
I want to clarify that this is not always the case. Many great CRO’s provide extremely valuable expertise and service to their clients. These companies have strict policies with excellent consumer protections. Good credit repair organizations put consumer advocacy first and follow through with the services they advertise.
Now even the best credit repair companies have a percentage of their clients that do not achieve their desired results and financial goals. Here is the reality: If a credit repair company is successful at removing all of the inaccurate, unverified and outdated information off of a credit report, it does mean the client’s score will automatically improve. Effective credit repair is a team sport. Without client participation, the process most likely WILL NOT WORK.
I cannot count how many clients come to us expecting us to miraculously help them reach their score goals. Here is the most common complaint we get: “I paid you money and my score has only gone up 5 points.” In some cases, this is true. Unfortunately, I can document that in 95% of all cases where there is no significant score increase, our client has neglected to work on their positive credit profile effectively.
Removing some derogatory entries does not make a great credit profile. Especially with damaged credit, consumers need to work hard and create a strong positive credit profile. Credit scores are actually predictive scores, the better you utilize credit over time, the higher your scores will be. Additionally new credit has to age in order to provide maximum score impact. Even if you add a new credit card to your profile, it takes time to “season”. It may take as much as 6 months or more for new credit to have a meaningful score impact.
As a credit repair organization, it is our duty to educate our clients on this reality of the credit scoring process. In my organization, we provide custom action plans for every client and continuously remind them to remain diligent. We suggest that our clients apply for 1 or 2 secured cards immediately upon enrolling in our services. Additionally, if they have a family member with excellent credit, we suggest they have themselves added as an authorized user on the account. This adds a “seasoned” account that may have an immediate impact on score increase.
Unfortunately life happens and many clients struggle to establish and maintain the ideal credit profile. This is one aspect of the credit repair process a credit repair organization cannot control. In reality, it is not a responsibility we should have. We are not the ones that will be making payments on a new home or car once their credit has been improved. It is the consumer that must look at credit repair as an education and investment, in their credit rehabilitation and long term financial stability.
When we do work together, and our clients are successful, it reminds me of why I love this business so much. There is nothing better than a client coming to our office just to thank us for helping them get approved for a new home. It happened just yesterday and it was amazing to see the joy on his face!