Legal vs. Illegal Credit Repair

You most likely see credit repair ads all the time on the radio, on television, and in newspapers. You may also see them in direct mail advertisements.

Some of these credit repair services are legitimate while others are very much illegal. Below the difference between these two largely different categories of financial reform are described in the next two sections.

Legal Credit Repair

Legal credit repair usually takes place using of the following methods: Error disputes, credit/budget counseling, debt negotiation, debt consolidation, and bankruptcy proceedings.

Each of these methods of legal credit repair is further explained below:

Error disputes-This is the process of writing creditors or credit bureaus and/or collection agencies to address a possible credit report error. A certain procedure takes place which may take up to 90 days to determine if an item on someone’s files is indeed a mistake. If it is a mistake then it would be removed.

Credit Counseling-Usually this is utilization of a professional service that can help you devise a budget. This is done to free up income that could be used to help you pay off your debts faster.

Debt negotiation-This usually involves professional intervention that helps creditors and clients agree on debt repayment terms. Sometimes in the process any debt that you have could possibly be settled.

Debt consolidation-This is the process of combining debts together by taking out a loan to cover them all. This is done in hopes to acquire a better interest rate for all debts combined-which sometimes is the case and sometimes not.

Bankruptcy-This usually involves legal proceedings to declare your inability to repay certain debts. Sometimes it might involve the liquidation of any assets you have or it might require a repayment plan. It depends what type of bankruptcy you file.

Illegal Credit Repair

In addition to access to legal credit repair services sometimes the internet leads people to possible deception. This deception is ear marked by usage of illegal services.

For instance, some illegal credit repair companies require consumer to pay large fees up front. In some case consumers may even pay as high as $1,500. In return they may promise to erase any blemishes on credit records as well as get new social security numbers for clients.

They might also allow consumers to piggyback on someone else's credit record. However, all of these actions are either very unethical but at the worst illegal.

According to what the Better Business Bureau tells consumers, no one can legally remove accurate and timely negative information from a credit report. Furthermore, it is usually nearly impossible to get a new social security number legally. Likewise, piggybacking on someone else's credit is considered loan fraud.