I received an email today (in my junk folder, where it belongs at least) from a guy selling "credit repair" services. Now, I understand that occasionally things show up on your credit report that shouldn't be there, and it is important to contest them with the credit bureaus to have them removed.
However, this junk mail -- titled "Credit Repair Offers Hope for Builders and Realtors" -- was such a BS sales job that it was almost funny. Almost, but not really, because I know that realtors and mortgage brokers are out there pushing it, and people are buying it.
I can already hear the proponents. "It helps people buy homes!" "It is a valuable service!" I agree that removing something that shouldn't be on your credit report will improve your credit score and potentially help you qualify for a mortgage. However, the entire email was written to give the (false) impression that they would "remove the negative items" in the report. They never mention that because you failed to make your credit card payment on time for 5 years straight, or had your car repo'd, or filed bankruptcy, you are still responsible and those items will stay on your credit report regardless of what you pay to this company. They market it as though they will just go in and wipe out anything negative on your report, and this is just false.
"No one can legally remove accurate and timely negative information from a credit report. The law allows you to ask for an investigation of information in your file that you dispute as inaccurate or incomplete. There is no charge for this. Everything a credit repair clinic can do for you legally, you can do for yourself at little or no cost." -- (From the FTC.gov website)
I think what scares me most is twofold:(1) That someone who is considering making the biggest purchase of their lives, and will be the biggest monthly expense for the next 30 years, has no clue that you can get (and should get) a free credit report every 4 months, and challenge any items that you believe to be incorrect - FOR FREE. Is someone with that little basic financial knowledge really ready for the committment of owning a home? If they don't know about their credit, can they be expected to understand escrowed taxes, insurance, maintenance costs, ARM's, homestead exemptions, and everything else that goes along with purchasing a home? (2) That a realtor or mortgage broker would push this service onto their clients, instead of advising them on how to do it themselves.
It seems to me that after getting a copy of their credit report (either directing them to www.annualcreditreport.com or getting it from the loan officer), it would be a good service feature for the realtor (or more likely the loan officer) to examine the report with the client, see if anything is incorrect, and then instruct them on the next step to contest it. Why would you direct your client to a company that will likely charge them thousands of dollars to do what they could do in 10 minutes online? No computer? Go to the library, use the one on your realtor or loan officers desk, work with a friend. Or call the credit bureaus and request a form to do it in writing. In my opinion, anyone that sends a client to one of these shops is doing a disservice to their client.
Thank you, we'll be in touch!