November 7, 2015 • By Dennis Beaver

It’s a fair bet that just about anyone who has issues with their credit history/score, has thought about using one of the many “credit repair services” which advertise using glowing testimonials.

“But they can cause you far more trouble than most people realize,” Los Angeles-based attorney Robert Brennan tells You and the Law. He is recognized as one of the nation’s leading experts in violations of the Fair Credit Reporting Act.

In a moment, we’ll explain why, but first, let’s finish last week’s story about Timothy, our Eureka reader visited the Folsom Auto Mall in September of 2014 wanting to buy a new car and needed financing. He filled out a credit application, they ran a credit check, but his score was too low for a manageable interest rate.

About year later, returning to the dealership, he checked the price, but a new credit application was not filled out, nor was there any discussion of finding better financing.

Shortly thereafter, Timothy’s identify protection service texts that his credit report was “pulled” by the dealership and sent to a number of lenders.

“Obtaining a credit report without permission is known as ‘Impermissible Access,’ and is a violation of the Federal Fair Credit Reporting Act with a statutory penalty of $1,000. However, these cases are often resolved for several thousands of dollars, in addition to the payment of attorney fees by the party acting wrongfully,” Brennan observes.

A credit score is lowered 10 to 20 points when a report is “pulled,” as this tells other lenders that you are shopping for credit and may become less able to repay existing or new loans. If done without your express authorization, as soon as you know, act quickly, and:

  • Via certified mail only, tell the business and the three reporting agencies this was done without your permission and to please immediately remove the inquiries from your file.

“If they refuse to,” Brennan recommends “contacting an attorney familiar with Fair Credit Reporting law, as ‘1681b’ lawsuits can have significant value for invasion of privacy and damage to credit reputation.”

And just how much are such suits worth?

“Willful damage to your credit is real. Either you cannot get a loan, or you’ll pay much more in interest over the long run. With solid facts, a clear violation of the law — as appears to be your reader’s situation — could be worth close to $30,000, and attorney fees are also reimbursed.”

Be leery of credit-repair services

The Financial Crash of 2008 was very good to one industry, doubling in size: Credit Repair Companies, of which there are now close to 7,000 across the country, according to the Federal Trade Commission, which cautions, “Many make highly questionable claims about the results they can achieve.”

Brennan agrees. “While there are some legitimate credit repair companies who have been in business for many years, still, you must be leery of the claims which are made about cleaning up bad credit.

“More importantly, we have seen scam and incompetently run credit repair services do real harm to people who had legitimate errors on their credit report, but the only way these people could challenge the incorrect entries was by going to court.”

Challenge everything

“A common example is a the person who has 10 items of good credit, two items of bad credit and one item that does not belong to them. A legitimate credit repair company should dispute the one item which does not belong to them, or if there is something false about the item of bad credit, that one as well.

“But scam companies run a dispute letter on every single trade line!”

“They are trying to overwhelm the credit bureaus with a frivolous dispute, because if the dispute goes unanswered for 30 days after being submitted, anything disputed is supposed to come off the credit report.

“What they are really doing is setting up the consumer for being labeled a 1681 frivolous disputant – a person who files frivolous disputes. After that, even someone with legitimate errors on a credit report will have a terribly difficult time in cleaning up the report and may need to file suit in court. This happens often.

“Valid credit repair isn’t something that you can ‘shotgun.’ It is not something where you can go in quickly and not worry about it. You have go about this methodically, carefully and with attention to detail. Unfortunately, that’s not how the majority of these companies proceed,” he concludes.

Brennan shared with us his advice on staying out of credit trouble, and that will be a future article.

Dennis Beaver practices law in Bakersfield and enjoys hearing from his readers. Contact Dennis Beaver.