On many points, the article makes sense and certainly, for those companies who basically claim to be able to give you a whole new credit ‘identity’, that is no more above board than creating a new identity to escape an arrest warrant. Specifically, the author points the following signs of trouble when dealing with so-called credit repair companiesCompanies that want you to pay for credit repair services before they provide any services.

• Companies that do not tell you your legal rights and what you can do for yourself for free
• Companies that recommend that you not contact a credit reporting company directly
• Companies that suggest that you try to invent a “new” credit identity - and then, a new credit report - by applying for an Employer Identification Number to use instead of your Social Security number
• Companies that advise you to dispute all information in your credit report or take any action that seems illegal, like creating a new credit identity. If you follow illegal advice and commit fraud, you may be subject to prosecution

It goes on to say that “you could be charged and prosecuted for mail or wire fraud if you use the mail or telephone to apply for credit and provide false information. It’s a federal crime to lie on a loan or credit application, to misrepresent your Social Security number, and to obtain an Employer Identification Number from the Internal Revenue Service under false pretenses.”, all of which is very, very true.

However, as someone who has actually used a credit repair company in the past, I have to say that there are some good ones who play by the rules and get good results. I signed up for Lexington Law in 2003 for about a year and during that time, they got my score from about 430 to 584 which was just good enough for me to be able to reestablish my credit with smaller lines of credit like gas cards, etc. As the article points out, Lexington Law and companies like them do little more than dispute erroneous information on your report, but for the time and process that it involves, I definitely felt it was worth the $30 bucks or so per month (at that time) to have them handle the seemingly endless cycle of disputes and corrections. Since then, my sister and a few friends have done the same with roughly the same results and roughly for the same reasons. They were just trying to get a slightly better score to be able to get a job or get a lower interest rate on a major purchase like a house or a car.

So, I had to weigh in on the whole credit repair issue because I think that with the right company, it can be helpful in raising your score. This, in turn, helps with debt reduction because the higher your score, the lower your interest rates. As for the many dubious companies out there who offer virtual credit MIRACLES, just use your common sense. No company can divorce you entirely from your financial past. Furthermore, the idea is not to vanish leaving your creditors holding the bag, but rather to learn how to become a more fiscally responsible person who is rewarded by sensible interest rates that make repayment of extended credit more manageable.

As with everything else in the money saving, debt reduction game, knowledge is power. So, you are encouraged to be well informed before entering into any arrangement to ‘clean’ your credit and just keep that old adage of ‘if it sounds to good to be true…’ in the back of your mind.

Read the entire article at the Federal Trade Commission.