Credit score quick fixes: Fact or fantasy?

Credit score quick fixes: Fact or fantasy?If your struggles with debt have taken a toll on your credit score, you may have been intrigued by ads from companies promising that they can fix your credit and increase your score. They don't tell you how they'll do it. They also don't tell you that what they're doing might not even be legal and, even if it is, you could do many of the same things they do -- for free.

"The biggest problem is the probability that people will spend a lot of money and not get anything accomplished," says Norm Magnuson, vice president of public affairs for the Consumer Data Industry Association.

But even the prospect of spending money for nothing isn't the worst thing that could happen. If you're not careful, you could find yourself committing fraud or making your credit score even worse. WalletPop spoke with several experts in credit "repair" to get the skinny on how they game the system.

The main way most credit repair outfits work is by bombarding the credit bureaus with dispute requests. "They're acting as dispute mills," says John Ulzheimer, president of consumer education for credit.com. When a dispute is sent, the bureau has to pass it along to the creditor, who has 30 days to respond. These companies hope that if they send a blizzard of letters, something will slip through the cracks and either the bureau won't contact the creditor or the creditor won't respond in the legally allowed time. This means the item in dispute (like an old late payment, for instance) has to come off.

But there's a big, big catch here, and Ulzheimer says it's something most people don't realize: Those "black marks" might come off, but they don't stay off. Creditors send monthly updates to the bureaus, and if you had an item removed due to a deliberately-created paperwork glitch, it'll go right back on the next month. In other words, you'll wind up paying a lot -- the experts we talked to said they've heard of people paying as much as $1,000 -- for a purely temporary solution.

In some cases, these companies may be able to talk a creditor into removing something like a late payment notification before the seven-year time frame is over, says Barry Paperno, consumer operations manager for FICO. Ironically, though, this might not have much, if any, effect on your score. The credit rating system assigns greater importance to more recent actions, so if you've made a few late payments this year, removing a four- or five-year old notification isn't going to do much. But older items are easier to convince creditors to remove, Paperno says, so these companies go after what he calls the "low-hanging fruit."

Another tactic some credit repair services use is something that's commonly called "piggybacking," says Paperno. In this case, the company pays people who have a credit card with a high limit (and good credit) to allow their customer to be added as an authorized user onto that credit card account. The company acts as a broker, so the customer never actually gets access to the credit card or the number, but on paper it looks like they have access to a great line of credit they're not using, which can raise their score. This is a legal gray area, warns Ulzheimer, since you're trying to present a fraudulent perception of your financial situation.

Ben Linton, education specialist for CredAbility, formerly the Consumer Credit Counseling Service of Greater Atlanta, says some companies promising to clean up your credit can leave you in worse shape. If you have an outstanding debt for which you've negotiated a payment plan, a company may promise to boost your score by erasing that obligation. Technically, while the dispute is ongoing, that debt wouldn't show up on your credit report. But after the dispute process is over (and the creditor reaffirms that yes, in fact, you do owe them that money), you've got two problems: First, the debt goes back on your credit report, and it's very possible that the creditor will scrap the payment plan and demand you immediately pay off the debt in full, or at a higher interest rate. The latter possibility is even more likely if you stopped making payments on the debt, thinking it was gone for good. This could have the unwanted effect of dragging your score down even further -- the exact opposite of what you were looking for.

FICO's Barry Paperno says he hears about a lot of discouraged people who got burned by credit repair companies. Many of them come onto the user forums at FICO where they can anonymously confess their consternation and shame at being taken in by the promise of a magically higher credit score.

Interestingly, when WalletPop asked, no one came forward to talk about their experiences with a credit repair company. All we heard from were a handful of people who sang the praises of credit repair firms -- and every last one of them worked for one. "Many feel disappointed that the agencies didn't do as much for them as promised or as much as expected," Paperno says. Frustration and even despair are commonly expressed, he adds.

Paperno touts the FICO forums as a good resource for people who want to clean up their credit themselves for free. He says users swap tips and advice and quickly learn how much they're capable of once they take credit repair into their own hands. "Many of these people become leaders within the community, including those who've gone on to be volunteer moderators," he says. Customer empowerment -- and for free, to boot! That's something we at WalletPop can get behind.

Did you pay money to a company that promised to fix your credit score? If so, we want to hear from you. Tell us in the comments what they promised ... and what they actually delivered.

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