After the past two days at a credit repair conference in Tampa, I spent my flight home reflecting on the industry. The topic that kept resurfacing was the bad reputation of credit repair. So I asked myself; why is credit repair considered to be such a pariah? Well in case you’re interested, I’m spilling the beans.
If you didn’t already know, credit repair carries a stigma that likens itself to snake oil sales and fraudsters. The BBB, FTC, CFPB, CDIA and FDIC are just some organizations that apply bad press to the industry. Additionally you have many within the credit repair industry that do a good job at tarnishing the name for us. They are either too new to know, or profiteers, looking for a cash grab with little or no regard for the law or consumers.
That is not to say that there are not good operators out there. As the owner of a credit repair company or CRO, and Executive Director of, NACSO our industry’s trade association, I firmly believe that credit repair is an excellent service for consumers in need. I like to think that I am one of the good guys and have found there are other great companies out there. Whether you are in mortgages, real estate, or a consumer considering using the services, I want to give you view from the inside so you can fully understand the forces at work.
Let’s start with the obvious; “Bad Actors”. Unfortunately many CRO’s or credit repair organizations either knowingly or unwittingly violate the law. To entice you, they promise 700 credit scores, new credit reports or claim to have an “in” with the credit bureaus. These are all illegal statements and companies that even elude to this should be avoided.
Bad actors also operate deceptively to the credit reporting agencies and data furnishers. The use frivolous dispute tactics and “Jam” the bureaus with dispute letters in the effort to trick the system into deleting the item. This is also illegal and could land all parties in hot water. That said, I think it is suffice to say that every industry has “Bad Actors” in it and still have good reputations, so that can’t be all there is to it.
Next you have the “Gold Rushers”. Gold Rushers are the people that hear that credit repair is easy money or were in a related industry and want to give a go at owning their own business. In fact I am one of those gold rushers! I was a loan officer and saw the need for a qualified CRO to service the industry correctly. I am fortunate to have a consumer litigator for a partner that helps me look intelligent and manages all of our processes. In fact we have serviced more than 7000 clients and continue to maintain a stellar record. Simply put, many newcomers don’t have the educational background to be a qualified CRO.
That is a brief view of the inside challenges credit repair faces. Let’s take a look at the outside forces that work against both legitimate CRO’s as well as the ones that should be avoided. Lenders, debt collectors and the credit reporting agencies have a vested interest in personifying CRO’s as pariahs.
Factoid: The primary function of our credit report is to provide a transparent, predictive snapshot of you ability to repay debts. Lenders make decisions to lend millions if not billions of dollars based on the information generated on a credit report. Falsely modified reports can severely hamper loan performance, costing the lender a lot of money. That is why some lenders warn against using a credit repair company. If done deceptively, a borrower with poor pay habits may qualify for a loan they should not have.
Next, debt collectors have the difficult job of extracting money from those that do not have any. Much of the debt they buy at reduced cost has little or no verifying data accompanying it. For this reason, debt collectors are less worried about the bad actors in credit repair. They are more concerned with the good operators that understand consumer law and credit reporting. Putting their feet to the fire for accurate data compounds the challenge of collecting already bad debt.
Last you have the “Big Three”, Equifax, Experian and TransUnion. The credit reporting agencies are the single biggest proponent against credit repair. In fact, they are the ones that approached Congress to have CROA passed in 1996. This was done to give teeth for the government to prosecute non-compliant credit repair companies.
The CDIA, the trade association for the bureaus to this day, testifies to Congress that credit repair is a scourge and the reason they have problems managing disputes. Additionally credit correction is big money for the big three. All three agencies offer a myriad of consumer and business-based products to help improve credit profiles. Credit repair companies not only cost them money from a dispute standpoint, we are also competitors.
So with all these forces aligning against us, why do I love it? Well I can only speak from personal experience, but I think the sentiment is similar throughout. Being a credit repair organization is like being David against Goliath. The challenges of correcting credit reports have been highlighted repeatedly in recent years. Credit and consumer law is very complex with most consumers having little or no knowledge on the subjects. Done correctly. we provide the guidance, resources and a VOICE for consumers to apply their consumer rights.
In closing, I consider myself to be anything but a pariah. In fact, when people ask me what I do for a living, I proudly say loudly: I am a consumer advocate, I own a Credit Repair Company!