Have you noticed all the companies and businesses that have sprung to life promising to repair or restore your credit? They will clean up your credit report and improve your credit score claim many; often in a matter of months.

With the economy being in the state that it is, there is no doubt that there are millions of people who have come upon hard times, having lost a job, and now find themselves in debt with no real means of paying all of the bills. This of course, leads to an assault on your credit rating as creditors report your latest payment history. Your rating declines and your ability to purchase on credit disappears, your buying power is greatly reduced.

Enter the credit repair specialists, companies offering services that will fix your problems quickly. These companies are everywhere it seems, advertising on television, radio, robo-calls and of course, the internet.

But can the credit repair companies deliver what they claim?

They tell the client that they know all of the “legal loopholes” to clean your credit report of all the negative data and that they have “inside connections” and “we do this all the time”. Claims of removing bankruptcy and foreclosure entries all sound exciting.

Desperate to have a fresh start you plunk down a $1500 fee after providing all of your most crucial information. Your credit card account numbers, social security number, mortgage and bank info, everything. After all, they will need this info to repair your record, right?

According to the Federal Trade Commission, last year saw a 50% increase of reports for credit repair scams. An FTC representative recently stated that “…to date, we’ve never seen a legitimate credit repair company”.

The Upfront Fee

They all want that upfront fee, and here is the reason why. They know that you can have no expectation of this repair happening overnight, so they tell you that they will be working on this during the next few months. You, in the meantime should keep an eye on your credit score. When you see no measurable change in your credit score during the next few months, you get on the phone to see how this is going on their end. This is when you find out that your credit repair specialist has vanished into thin air.

Other companies will actually file numerous reports with the credit reporting bureaus, disputing your debts, which may in some cases temporarily remove items while they are being investigated, thus making them look like they’ve actually done something, but this places your file in a “pending” status. If accurate, those items will return to your report in a relatively short amount of time. In either scenario, you’ll be out the upfront fee ($1000 to $2000) and nothing will have changed but the calendar.

The claims by these companies are numerous and the Federal Trade Commission says that they haven’t seen any legitimate credit repair companies, so who’s right? I’d bet my money on the FTC.

By now you surely realize that there is no magic wand for bad credit, it’s something that happens during the course of life, and it’s something that you have to work through. Regardless of your credit status today, if you can pay all of your bills on time going forward for two years, you may be surprised at the result. Everything may not be removed during this period (bankruptcy and foreclosure have long lasting affects) but you will be in a much better position than you are today.

For credit repair a better place to start, which will most likely provide a better result is to contact a legitimate credit counseling service who can arrange a restructuring of your payments or a consolidation plan. Many of these agencies provide free services, or a small fee may be required.

The National Foundation for Credit Counseling is a highly respected network that provides a variety of services. If you or someone you know has a circumstance that requires credit counseling or financial education, contact the NFCC and keep your dignity and peace of mind.

Victims of these scandalous companies should contact your state’s attorney general.

What do you think should be done about these companies who prey upon people already in trouble?