Beware companies selling credit ‘repair’ services

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Consumers have a right to dispute mistakes on their credit reports. But if they’ve made late payments, that can’t be erased, consumer experts say.

By Ann Carrns | The New York Times CompanyAnyone whose credit score has been marred by late payments or financial stumbles can understand the allure of a quick fix that scrubs tarnished credit. But beware the companies that sell credit “repair” services over the phone and charge fees upfront.

Consumers have the right to dispute mistakes on their credit reports and to have the errors corrected promptly — although it can sometimes be frustrating. “Our view is that people shouldn’t need to pay a third party,” said Jonah Kaplan, senior program manager of consumer reporting markets at the consumer bureau. “They can do it for themselves for free.”

As part of the settlement, the companies were barred from telemarketing credit repair services for 10 years and must notify customers of the settlement and explain the process for canceling the service. As delinquencies on credit card debt have risen to prepandemic levels, the National Foundation for Credit Counseling has seen a “steady increase” in demand for credit counseling services since the spring of 2022, said Bruce McClary, a spokesperson for the foundation. According to reports from its member agencies, he said, both counseling activity and enrollment in debt-management plans have returned to prepandemic levels.

Research on borrowers who took advantage of payment pauses from their credit card companies during the pandemic and then enrolled in nonprofit debt-management plans were significantly less likely to default than similar borrowers who did not participate in such plans, said David Silberman, a senior fellow at the Center for Responsible Lending.

 

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