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How to Avoid Credit Repair Scams

How to Avoid Credit Repair Scams

The goal of most credit repair scams is to get you to pay a monthly fee for as long as possible.

A big part of helping folks buy their first home is to help those that are not currently eligible to qualify for a home mortgage to get into a position to do so.

Assuming that you have a steady job and household income sufficient to comfortably make a mortgage payment, the next biggest hurdle for people trying to become homeowners is credit.

When you have such an obvious, and manageable hurdle to overcome, it opens the doors for predatory business models to lure unsuspecting consumers to their lair with promises of frictionless qualifying, if you only pay a small monthly payment……but for how long?

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Herein lies probably the biggest challenge for consumers that find themselves in need of assistance in order to reach their goal.  Who do you trust?

My hope is that by “being a fly on the wall” during my conversation with an expert in this area is that you will be able to derive truth, meaning, and a path to reaching your goal without falling prey to what “you do not yet know”.

And you I’m not asking you to simply trust our word for it.  I found this great article on LendGenius.com, “Credit Repair Companies: Pay Attention to These 5 Things Before Signing Up” that provides even more great insight and advice for avoiding getting into hot water with unethical credit repair companies.

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Have questions?  Scroll to the bottom and ask away!

Scott: Findmywayhome.com, the video series here, I guess, I really should come up with the proper name for these things.

If this is your first time watching our video or being on our website, find my way home is a consumer education site, and we help folks understand the process of buying homes.

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My main goal with this site; so I’ve working on the site for 10 years, we’ve had over a million visitors in the last 10 years, and we’ve answered thousands and thousands of questions from consumers all over the country. My primary goal here is to is to help consumers see what experts look and sound like.

Today I’m joined by a friend of mine, Sam Parker, who is the owner and proprietor of My Credit Guy. Sam, how are you today?

Sam: I am doing great.  It’s an amazing day and I have no complaints.

Scott: Sunny Arizona?

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Sam: Everyday.

Scott: So we’ve done a series of these videos with Sam. Sam primarily works with people like me, loan officers in the mortgage industry, and he’s kind of a specialist.

He is very much an expert in his field, he has many, many years of experience and what Sam specializes in is great advice, and working quickly to help work with people to restore their credit for the purposes of buying homes.

What I run into a lot of time on the website is we don’t find as many people that are proactive in doing research and trying to find answers.

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What I see more often than not, is people that got into a bad situation and they’re going to Google to try to figure out how to get out of it. And one of those situations is to credit repair scams.

So you may be out there saying, I want to buy a home, want to look at maybe pull a free credit report, maybe you do it on your own. A lot of times I even see loan officers giving referrals to what I consider credit repair scams.

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I don’t know if they are actually illegal, but I think at the very least, a lot of them are unethical to a very, very high degree just because they’re more concerned about taking your money for the longest period of time, and making you tread water, than they are actually helping you.

So, Sam, I wanted to get you in here because you are one of the most professional people I know. You’re absolutely an expert in your field, and I consider you, I hold you up as the way it should be done, and everybody else I call a scam.

So I don’t want to conclude, I’m not saying anybody’s doing anything illegal, but I can tell you there is a lot a really bad advice being given out there.  What do you see under the pretense of other credit repair scams, what kind of things do you see out there because I’m sure you’re picking up other people’s problems after they’ve gone through these other situations, what are common bad situations to get in out there?

Sam: Yeah, yeah, unfortunately, you’re right, I mean my industry doesn’t have the best names, and unfortunately, it’s because my industry has earned that reputation.

There is some misconception out there, but there’s also been an awful lot of abuse—done this so let me kind of start from the beginning. Okay, we have to play by a set of the rules that is called the credit repair organization act. It’s a federal mandate that says a couple of things.

And it really boils down to only a couple of really big rules that, I mean it’s a long document, don’t get me wrong, there’s different things, but really at the end of the day, they’re supposed to not charge upfront fees for credit restoration services.

And you’re not supposed to make false claims in terms of what you can do, what a client should do, what your service is able to provide, and so basically, you’re not supposed to say we can get everything removed for you, no problem.

Or even be in the ballpark of saying that you can get accurate, verifiable data removed because you have some sort of special sauce, so the backup to that, what I see a lot is what I consider violations of FCRA by clients being charged upfront or what I consider to be upfront.

Now, there are ways to hide behind semantics, to hide behind, well technically, we don’t charge until day 3 and technically our service is to put your file together in our office.

Well I don’t do it like this because I judge everything, as I’m building the business of user experience. Meaning, when you get done with talking to me, how do you feel about it or what was your goal? What was yours, and no client sized up with a credit repair company to have a file put together in a credit repair office.

That’s not what they’re signing up. They’re signing up for improvement of their credit profile or to reach a certain goal. And again I only referenced the way that we do things because I truly believe and I saw we do things the right way to benefit all parties involved, especially the consumers.

So we don’t charge until the 30th day of service. Now most credit repair companies don’t work like that. They charge something, an enrollment fee, a setup fee, paperwork, filing fee, something much sooner than that either at the time of the moment or just a few days after so I don’t charge.

Scott: But it’s not illegal because it’s like you said, semantics. They were naming the fee something that’s not a credit repair fee. That’s a file initiation fee or that’s a setup fee or admin fee or something like that. But the reality is it’s a junk fee.

Sam: I believe so. Now, can we get into the whole argument of, well the clients I’m dealing with have a track record of not paying for services when credit is extended to them? We could get into that argument, but that means we need to go and get the laws changed.

It doesn’t mean that we need to make up our own. So, do I think that should be able to charge a client upfront especially if they have a track record of not paying people? Sure, but that’s not the way the law is written and I want to be around for a really long time.

So we don’t charge until the 30th day, after the client, they’re not receiving all of their results by the 30th day, but they’re receiving some, they’re seeing the lesions, they’re seeing updates, they’re seeing that we’re communicating on their behalf, and that things are changing because of that.

So we’re providing not only that but by that time they’ve also received credit education help from us, they received budgeting, they probably have been instructed on how to open up positive trade lines and how to maintain those.

So they just get a lot of service before they’re charged, and that’s the way I believe that we should do it in this industry. But obviously there’s a lot of credit repair companies that disagree with me because most of the contracts are blank.

The other way that people charge in the credit repair world, there’s upfront fees. You got large upfront fees, or you got a little upfront fee, and the monthly fees that seem to go on forever with no end. So, to combat that, what we’ll do is we’ll guarantee our turn around times.

If I quote somebody, hey, I think that we can be any fix and back out within three months, and we take five months, then we don’t charge for the fourth or fifth month because that would be a bait and switch which is what a lot of credit repair companies do.

And that’s after their initial, oh my gosh, we’re the best credit repair company out there, we can do this, this and this. And then a month, two months, three months later, there’s a, oh, you’re being crazy, we can’t just get that items removed, and it’s like you’re absolutely contradicting what yours sales act was.

And so you’ll end up with clients that have been with the same credit repair company, for 6, 9, 12, months, and sometimes we even have to sign a contract for those 6-12 months and I just think a client should need us for as long as it takes and if it only takes 2 or 3 months because we’re busting our butts, and then they should be done, and so that’s the way I view it.

The other way, and it’s what I considered to be a little bit more fair is some companies will charge like per deletion or per update fee, and that’s all well and good except for that it’s typically gonna be somewhere like the $75 per item, per bureau range, meaning if you have a medical collection and it’s on all three credit reports, and I get it deleted, okay you owe me 75×3, not 75 bucks.

So it’s not uncommon for me to get 10 deletions for a client meaning 10 items, so technically, 30 items if they were all on three credit bureaus, times 75 bucks, oh my gosh, so now, our client worst fear is that they’re gonna get great results, so that means you’re gonna owe me 2, 3, 4, thousand dollars.

So, again, I’m not trying to sit up here to judge, but I do believe that that we’ve nestled into that niche where everybody can benefit, it’s affordable and they’re getting the home loan and we get paid, yeah, I should get paid for what I do. I’m not gonna do it for free, but I don’t need your first born, by any means.

Scott: So you said something that was really important and we’d cover this in a different interview that we had done. You said that, man, I just lost my train of thought  So when talking about identifying a credit repair, like a credit repair scam, I’m gonna call them scam, screw it.

So credit repair scams, you know, you talked about, yeah, these companies that charged by the deletion, but we had talked in a different video about maximizing your credit scores. You don’t necessarily want to delete collections and charge-offs and things like that off your credit report, especially not if time is of the essence.

So, could a company come in and say, you know, we’re gonna charge you to remove all of these things, and it’ll make your credit look better 12 months from now, but they’re not necessarily understanding what the goal of the credit repair is?

And is it okay if your credit is not good for that small period of time or what have you. And another thing that I’m thinking here is because you and I have talked about this a lot.

Part of your service is you typically do a review of the credit, and you will determine up front whether or not you think there’s something you can do because you can’t help everybody.

Right.  We will never take a client or we won’t refuse probably about 40% of the clients who come to us, refuse is kind of harsh, we will give them free advice and marching orders that they can.

So we’ll sort through them because I don’t charge upfront, and so if you haven’t seen any movement, now contractually, you’re supposed to pay me on the 30th day, you’re not gonna want to pay me if I haven’t done anything for you, and B, the way that we work is on rules.

 

Meaning, if Scott sends me a deal, and I hurt somebody or screw them over or do something scammy to them, I’m not gonna do anymore deals, for them it’s just bad business, and that’s just a pure business standpoint why we wouldn’t do it, plus, I love l sleeping at night, I love not having anxiety and the way that you do that is you just treat everybody that you come across in this life, whether it’s business or personal, the way that you would want to be treated and the way that you would want your sister or your mother to be treated.  

So that’s one thing that we keep in mind, is that every single person that we talked to is somebody’s something, and so, we will only sign somebody up if we are called in that we can help them achieve the goal that they’re coming to us for, not just, I’m gonna be able to say, well you know, we did get one deletion for you, but your score is only 28 points, but technically, you owe me the money now. That’s not what we’re going for, it’s just, we like to help people, and that’s not helping anybody if you’re signing them up under false pretenses.

Scott: Well I think it speaks volumes about who you are and what your company stands for, just based on your business model. You could go consumer direct on this, and then you would be competing with all of the companies that I consider to be credit repair scams.

There are large telemarketing rooms, and they are just punching numbers in the computers, and they don’t necessarily care about you as an individual. They care about meeting their sales numbers and their sales volume, and I think Sam, you and I have similar challenges that the companies that treat consumers the absolute worst are the ones that everybody knows because they have the most money to spend on marketing and advertising and TV commercials, billboards, and things like that.

And if you are just contacting, so I have, for me, there is a distinction between a credit repair company and what you do, which is credit restoration.

And you are not necessarily, well I mean, I guess it is semantics, but restoration is really, it’s more about helping you now and helping you into the future when you’re doing business with somebody like you. How would you describe credit restoration that you do for a client?

Sam: So you know, and the way that I would describe it is that when you leave my service, you will never be back in the situation that you were when you came.

But what credit repair companies in general do is it’s kind of dispute factory, they get you in, they throw a bunch of stuff at the wall and hope that it sticks. There’s no personal connection.

There’s no budgeting, so the behavior never changes. What we’re doing is we’re trying to make a true overall financial restoration of somebody where once that they’re done with us, their life is better, they’re empowered with the knowledge and habits that they need to maintains this new great credit score that we help them get.

But, it would be like having somebody come in to a gym, have them blindfold themselves, you hook onto machines, they walk out skinny, but they don’t know how and they don’t why, and they’re never been taught diet or exercise or any, you just gave them a magic pill and within two months they’re back the way that they were at because we never empowered them with the knowledge.

Because all we had was a, with these companies, they just had dispute mail, they’re not doing the education, they’re not doing the behind the scenes work that it really takes, and then you know on top of that, so you got your telemarketing companies like what you’re talking about, and now you’re going to get them the networking marketing companies where somebody who had a 470 credit score yesterday signs up for something with their cousin who is now calling themselves the credit repair experts and now that 470 is also calling themselves the credit repair experts. 

So every client that signs up is also being encouraged to be a rep which means that they’re going out there and going from a very low knowledge to no identifying themselves as an expert and just by signing up from my package, now you’re an expert too, and that gets away from, in my opinion, what credit restoration should be and that’s looking out for the well-being of somebody to make their life better.

Yes, they made mistakes. Yes, they did something wrong on their credit. But with education and empowerment, and helping them get something straightened out, they can live a total different life, because you and I both know that living life at a 580 is much different than living life at a 720 or an 820.

It’s just two totally different life experiences, two totally different sets of opportunities. It’s living in a small apartment to living in a nice house for your family. It’s just some very clear differences, and when you don’t care about any of that, I believe that you’re in for the wrong reasons.

So that’s just me, up on my pole pit, being a judgmental, but I’ve been in his industry for 15 years, I’ve seen it done wrong, I’ve seen it done what I consider the right way, and I’ve seen the clients the way that their lives are after both, and one is just totally different than the other.

Scott: Is there a quick and easy way for somebody to identify if we’re going down the wrong path with a credit repair? I mean are there telltale signs, like you said, if they charge within 72 hours, you know, that’s probably not necessarily a telltale sign or is practice indicative with, I guess you would call him credit mills, right, so they are just factories?

Sam: There are companies out there that I don’t hate, that do charge within the first couple of days and they do it, sometimes under state law. They say, hey you know, in this state, we’re allowed to, but again, I always defer to the federal law.  

And when I was in Iowa, when I first started in credit repair, I was 19 years old, in my very first company, I did charge upfront because under Iowa state law, if they’re licensed and bonded, you can charge upfront. Later in my career, you know, I came to realization that that’s not the way I want to play things.

So I can’t say that I am without sin in the industry, but I just looked at it like who am I looking out for and the way that I like to do business is by looking out for my client first and then that then flows down to me being looked out for.

When I first started business, I was probably looking out more for myself than anything and justifying it as providing a good service, but I want to get every benefit to the client and make sure that we’re doing it all the right way.

If you are seeing companies that when you get a hold of them, you hear that chatter in the background and it’s other people and you can tell that you are talking to a call center that might be something you want to avoid.

If they’re trying to charge you before they’ve done any work, that might be something you want to avoid. If they’re telling you every single thing you want to hear, that is definitely something to avoid, and if they’re saying, what about this and this and this, and they’re like, no problem, we get stuff like that deleted all the time, yeah, that will most likely come off or stuff like that.

It’s just something that you should avoid, where with us or with other good companies, we’re gonna say, well listen, here’s the deal, right now, you’re telling me that this inaccurate.

If it is inaccurate and there are violations of the federal credit reporting act and that’s how we’re gonna dispute it, and it should come of the credit report.  

Now, what may happen, and I’m not calling you a liar, to the customers, but if it comes back as verified, then we would need to switch gears and figure out how to help you make good on this deck in a way that it’s not gonna affect your credit.

There should always be a progression of, okay and then this, not just dispute, deletion, whether you owe it or not, I mean, I see these Facebook post going around right now that says, echo facts experience trans are under fire right now, and if you have any collections, don’t pay them off, you don’t legally owe them anymore or you know don’t pay them, we’ll get them removed, even if you owe them, and I’m just like, what is going on here, like how long have somebody—secretary of state fraternity channel, FTC, somebody, come on here like, these are going to violate somebody.

If it just looks too good to be true, it probably is. And, if your mortgage national is referring you to them, one thing that I would ask even though you know you’re gonna have to take a big goal before they ask them, ask them and look then in the eye and say, “Do you get compensated by sending me to this credit repair company, I just want you to be upfront, do you get a referral fee?” If the answer to that is yes, then more than likely your best interest is not. In mine, a $50 referral is, and so, do I have people asked me for referral fees?  All the time. But that gives away from the spirit of what we’re trying to do. We’re trying to get some get qualified for the home loan.

I would rather discount the client’s price than to hand somebody a check for multiple reasons. But my point is just if you were referred to them, it’s usually a good sign and then just clarify why are you referring them to me. If it was you Scott, you would say, well because I have a track record with Sam and because he’s helped me and he actually… you know there’s one friend of mine that we talked about all the time where another you know loan officer, working with a different company might say, because I have an affiliate relationship.  

Scott: Good, well I want to wrap this part up because I mean, there’s so many different ways that this, there’s a million ways to do it right. There’s a million ways to do it wrong.

At the end of the day you have to be able as a consumer. You have to be able to identify whether they are just trying to grow their business and get their paychecks or whether their mindset is, I’m going to do the best job that I can. I’m gonna help you and by benefiting you, I’m going to benefit myself.

One thing I think that’s really important, that is sort of a telltale sign is you can tell your clients with a certain amount of certainty how long this should take right.

You said your goal is to actually try to get them in and out of the system and average 97 days. That’s really good because that dispute process is like a 30 day response, so that’s a couple rounds of disputes, and doing some planning there.

I think that’s an indication also of an ethical company is that they are, not only are you up front telling them, hey, I’m looking at this and you’re one of the 60% of the people that I think I can help or listen, here’s some free things you can just do on your own. Why don’t you go ahead and do that, and then if you can help them, you’re saying, it should take us about this much time.

So you’re really shaping the battlefield, you’re setting their expectations, and you’re truly looking out for their best interest.

And Sam, that is why I’ve got you on here because you’re good people and I appreciate that about you, and I thank you for being here again. This is super valuable. If we save one person from credit repair, we’ve done our jobs, and we can sleep good. So thank you again, Sam.  

I look forward to these future videos with you, and I will talk you soon.

Sam: Thank you, bye-bye Scott.

Scott: Alright, bye.

Working with a Mortgage Expert

Choosing the best mortgage based on your qualifications requires that you work with a professional loan officer that has experience with all of the options that are available to you.

All mortgage companies are NOT created equal.  Big box lenders that advertise on TV, radio and the internet, often only target a very narrow qualifying criteria.

These popular lenders spend millions of dollars on marketing and advertising, only to dump you into a call center and put you in the hands of an inexperienced customer service telemarketer.

Big box lenders try to convince unsuspecting consumers that it’s the lender that matters, and never mention the fact that your loan officer is the gateway to you getting the best mortgage.

You should avoid these types of lenders at all costs if possible.  They do not offer lower rates or better service, but they do have more money to convince you that they do.

Set Yourself Up for Success

Not sure where to find a professional loan officer that you can trust?  You’re in the right place!

If you have any questions or comments about this topic, feel free to leave a comment below, or you can shoot me an email at questions@findmywayhome.com.

Now sure how to identify a professional loan officer?  Watch these expert interviews I’ve done with professional loan officer friends of mine.

I firmly believe that once you hear how a professional loan officer communicates, it will help you to avoid silly mistakes and errors that are common with inexperienced or uneducated loan officers.

About Your Expert

Scott Schang

As a 19 year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. I have been writing about consumer protection issues, and making sense of complicated real estate and mortgage topics on this website since 2007

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