Credit Repair Companies Can't Fix Everything

As the economy sours and credit remains tight, consumers with poor credit scores are especially vulnerable to those that promise to clean credit histories, boost credit scores and even eliminate bankruptcy filings. But credit repair firms can't always do what they claim, and dozens of them have been sued.

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For many consumers, low credit card scores are a worry. And some have turned to credit repair companies. These services promise to power wash your credit history, raise your credit score, even erase a bankruptcy filing. Consumer advocates say these companies often charge a lot, but don't deliver. And the lawsuits are piling up. NPR's Wendy Kaufman reports.

WENDY KAUFMAN: As consumers struggle with too much debt and woefully low credit scores, many are tempted by ads and online promotions such as this one.

(Soundbite of promotion)

Unidentified Announcer: Congratulations. If you're watching this video, you've taken the first step to obtaining better credit. Don't hesitate.

KAUFMAN: They call themselves credit repair companies, and they promise to clean up messy credit reports and remove derogatory information from your credit file. Often they promise to raise your credit score by hundreds of points, making it easier to qualify for a mortgage or get a better interest rate on a loan.

Mr. CHARLES HELMS (CEO, Consumer Counseling Northwest): They can't do anything for you that you can't do yourself.

KAUFMAN: Charles Helms is CEO of the nonprofit organization Consumer Counseling Northwest, which helps consumers with credit problems. He says firms that promise to have factual and accurate information deleted from your credit history are simply out to scam you. And asking for money upfront is illegal.

Mr. HELMS: We had people come in. They paid $700 to get their credit repaired when actually everything on their credit report was accurate. I mean, they had late pays. They had slow pays. But they were taken in by these people's promises of we can fix anything. You know, we can raise your credit score by 300 points. And they can't. If it's accurate, it's staying on your report.

KAUFMAN: The Federal Trade Commission has received thousands of complaints from consumers about companies who made such claims. And last month, the FTC and numerous states sued dozens of firms, alleging false advertising and unfair and deceptive practices. Federal law provides a free, relatively easy way for consumers to dispute items on their credit report. They notify the credit reporting agency, which sends the disputes out for investigation. If the items are incorrect, or can't be verified, they must be removed. Attorney Steven Baker of the FTC says the companies which were sued typically used that same law but twisted it, challenging everything on someone's report even if they knew the information was accurate.

Mr. STEVEN BAKER (Lawyer, Federal Trade Commission): These folks say, we will continue to challenge and challenge and challenge this information, that it is expensive for the credit reporting agencies to re-investigate, and they just get tired and they remove the information.

KAUFMAN: But, he says, that's simply not true. NPR attempted to contact many of the individuals and firms sued by the FTC, but those efforts were unsuccessful. The major credit reporting firms were thrilled with the government crackdown, according to Stuart Pratt, head of the Consumer Data Information Association. Pratt says most disputes are now investigated and processed within 10 days, thanks to technology and a nationwide system for administering disputes.

Mr. STUART PRATT (President and CEO, Consumer Data Information Association): And because of that, lenders have a much easier time responding, and responding accurately, and keeping that data on the file when it should stay on the file. In the converse, if the data is not accurate, that system is incredibly precise and ensures that we remove data from the file when we should.

KAUFMAN: In today's tight credit market, many individuals will want to ensure the accuracy of their credit reports. But consumer advocates warn that repair companies are not the way to go. Wendy Kaufman, NPR News.

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