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Credit Repair – Fact or Fiction?

"We've never seen a legitimate credit repair operation" - Steven Baker, director of the Federal Trade Commission's Chicago regional office

Despite the phenomenal claims made by most credit repair companies, the only service they can legitimately offer is disputing tradelines (account information) in the name of the consumer. 

The truth is: 

  • The filing of a consumer dispute is the only method anyone other than the creditor, a credit reporting agency, or the credit bureau itself has to affect change in a credit file. 
  • A credit repair company cannot do anything a consumer cannot do independently.
  • In fact, a credit repair company cannot even obtain a copy of a consumer’s credit report. (Credit repair companies are prohibited from accessing Equifax, Experian, and TransUnion.)

The consumer who chooses to handle them directly can usually accomplish the necessary “credit repair” tasks for free and more quickly than by going through a credit repair company:

  • Consumers can obtain free copies of all three credit bureau files in minutes at AnnualCreditReport.com1
  • If errors are found, consumers can dispute them immediately, online, at no cost. They are also provided a toll-free number to reach live customer support and people who can answer questions and assist them with the process if needed, including faxing documentation – all at absolutely no cost. Except for credit rescoring, this is fastest possible method of updating a consumers credit file.

A Warning For Mortgage Professionals

Over the years we have seen many brokers and lenders audited by the credit bureaus. These audits are often triggered by borrowers who – at the recommendation of credit repair companies – frivolously dispute items in the credit report provided by a mortgage broker. 

Unfortunately for the brokers and lenders, these audits can result in the termination of their access to credit data.

Based on monitoring dispute/inquiry patterns, each individual credit bureau regularly publishes its own "alert" list: mortgage companies and individuals who are barred access to that credit bureau's database of consumer credit files. 

Due to the predominant requirement of the three-bureau merged credit report within the mortgage industry, all mortgage company end-users should be acutely aware of the ramifications of engaging in barred credit repair activities. Engaging is such activities puts you at risk of being 
denied access to a tri-merge credit report, a scenario which would severely hamper your ability to originate mortgage loans.

Warning Signs: How to tell if a credit repair company is disreputable

Up-Front Fees
Charging up-front fees violates federal law. Many credit repair companies will attempt to disguise these as "account set-up" or “analysis” fees. Others may require you to pay hundreds of dollars for a “training manual” that promises access to "free" credit repair. 

For more details, read the full text of the Credit Repair Organizations Act (CROA)

Inability to Accept Credit Cards
This important warning sign often indicates that the firm has been unable to gain approval to process credit cards (which requires a physical inspection and positive financial history). 

A questionable company will often require payment via a third party credit card processing company (such as PayPal®), check by phone, ACH/direct debit, or even post-dated checks. These payment methods typically offer less protection from fraud. 

No Physical Location or Direct Contact
Don’t let a spiffy website and a few positive references fool you. It’s important to do your homework on any credit repair firm before sharing any confidential credit data or credit card information with them. Do some digging and ask some questions. 

Mortgage Professionals: Look out for your applicants

Before you recommend that your applicant dispute items on a credit report (either directly or through a credit repair company) talk to your credit reporting agency to be sure a dispute is the best course of action. Here are just a few considerations your credit reporting agency might bring up:

  • When looking at a tri-merge report, you don’t know which credit bureau is reporting which data, so you can't even tell which items to dispute through which credit bureau. To make matters more confusing, the merge logic used to produce the tri-merge report might be responsible for the error, in which case no dispute is needed.
  • If your borrower disputes any tradeline, that item is locked from any further actions until the dispute is resolved. While re-scoring tools may have been able to correct the issue in as little as 72 hours, once a dispute is filed, you no longer have access to the re-scoring option. 
  • There may be alternative actions that will provide much faster results than filing a dispute. (Contact your Birchwood sales representative for more information.)
  • It may be possible that removing an item (even if that item contained derogatory data) will cause the FICO score to drop, or – worse yet – that item might have been critical to meeting the minimum requirements to produce a FICO score. If you remove the item, you may also lose the entire FICO score. 

The bottom line: You can't un-ring a bell 

Unless you are absolutely 100% certain of what you're dealing with and if/how a particular action will change the credit score, it's best to have your credit reporting agency confirm that your actions will provide the expected results. That’s what we’re here for.

Unforeseen Credit Repair Dangers for Consumers

There are many risks associated with credit repair, including:

  • Paying for credit repair services that may or may not be legitimate or provide any benefit to you
  • Damaging your credit score via barred credit repair activities 
  • Bringing your accounts to the attention of creditors by providing them with your current address (potentially resulting in new collection contacts and phone calls)

When it comes to improving credit, consumers are almost always better off working proactively either independently or with their mortgage professionals. At Birchwood, we work hard to ensure that our mortgage professionals have access to all our knowledge and resources so that they can provide their consumers with the most accurate and helpful information, and – ultimately – the best credit terms possible. 


Please note: AnnualCreditReport.com works very well for correcting any errors appearing on any of your credit reports, but does not include your FICO scores. The only place to obtain your credit reports (Trans Union and Equifax) WITH your FICO scores is MyFICO.com.

Also, the Experian credit report is not available on MyFICO.com.

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