Your poor credit score has held you back from so many things—you can’t get a decent interest rate on a car loan, your mortgage application was denied, you’ve had to settle for a run-down apartment, you may have even been turned down for a job because of it. You’ve had enough and want to fix it. Working with a credit repair company—called a Credit Services Organization (CSO) in California—may seem like a smart way to do it. While you will pay a fee, a CSO might be the way to go, or it might not. Let’s take a look at how these companies work and what they can and cannot do for you.
How Credit Services Organizations Work
You have a lot on your plate, and the thought of going through all the steps it takes to try to fix your credit is understandably overwhelming. Paying a CSO to take care of these things for you is pretty tempting. If you do choose to work with a CSO, be sure you understand exactly what they can do for you and what it will cost. As long as you understand that you can do all of these things for yourself, it’s probably fine to use a CSO.
To a Credit Services Organization, “fixing” your credit generally means that they will do the following:
- With your permission, request a copy of your credit report from each of the consumer credit bureaus—Equifax, Experian, and TransUnion.
- Review your reports to identify negative entries such as delinquent accounts, late-payment notices, bankruptcies, and tax liens.
- Verify that all the information on your report is accurate.
- If they find errors, their services may include corresponding with the credit bureau to remove the incorrect information from your report.
- Offer advice on improving your credit, which may include suggesting that you open new lines of credit.
Just as important as understanding what a CSO can do is understanding what they can’t do. A CSO, no matter what they may imply, cannot do the following:
- Remove accurate negative information from your reports
- File a lawsuit against a credit bureau or debt collection agency for violating your rights
- Require payment until they’ve delivered the promised results
If a CSO tells you they can do these things, or they guarantee that they will improve your credit score, it’s probably a company you don’t want to work with.
A Recent Cautionary Tale
The federal Consumer Financial Protection Bureau (CPFB) recently filed suit against Lexington Law, a major player in the credit repair industry. The charges are mostly related to violations of the Telemarketing Sales Rule and the Consumer Financial Protection Act and range from charging fees illegally to misrepresentation of services. The biggest problem with companies like Lexington Law is that they suck up time and money from consumers and sometimes make their situation WORSE by:
- Filing multiple disputes without any information, which are often deemed to be "frivolous" by the credit bureaus and are thrown out.
- Wasting time leading consumers to believe they are fixing their credit when they are, in fact, doing nothing. Consumers only have a limited time to file a lawsuit after they discover a credit reporting error. By the time they realize this and contact an attorney, it's too late.
Lexington Law is one example of a disreputable credit repair company, but that doesn’t mean all CSOs are out to get you. They are limited in what they can do, however, and at some point, you may need to contact an attorney to take the next steps.
Are You at the End of the Line With Your CSO?
If the credit repair company you are working with has done everything they can to remove incorrect information from your credit reports, it may be time to get in touch with me to discuss next steps. If Equifax, Experian, or TransUnion has been properly notified and given time to respond to your dispute and hasn’t, you may be able to file a lawsuit for damages. Contact me online or call my office directly at 855.982.2400 to find out what to do next. The best part is, I won’t charge you a dime unless we are successful in winning damages from the credit bureau!