Many Texans are familiar with the difficult financial times we live in. If you are looking for solutions to your financial difficulties, where should you turn? What choices can help you down the road to recovery? What choices can harm you?
In this blog post, we will discuss one choice that you should avoid (credit repair companies) and one choice to consider (filing for bankruptcy).
Credit Repair Companies
While some credit repair companies are legitimate businesses, many of them offer false guarantees and use shady practices to gain business. They end up taking more of your hard-earned money from you rather than helping you toward financial freedom. They offer services to repair your credit score while not actually being able to provide the credit improvement they promise.
Companies offering an overnight solution, if they do anything at all, often use fraudulent tactics to gain business. For instance a company might create a new identity - and thus, a new credit score - by requesting an Employer ID Number. These companies often provide poor or incorrect advice, such as telling clients to dispute all information regardless of legitimacy or suggesting clients should not contact the credit reporting agencies directly.
Credit repair scammers offer promises like, "we can erase your bad credit - 100% guaranteed," when in fact there is no quick fix to remove accurate, negative information from a credit report. It takes a concerted effort, a repayment plan and time to improve a poor credit situation.
This is one of the many reasons why filing for Chapter 7 or Chapter 13 bankruptcy may be the best choice for you. Chapter 7 bankruptcy ("fresh start" bankruptcy) allows individuals to liquidate their assets and discharge most of their debts, while Chapter 13 bankruptcy helps individuals pay back creditors through 3-5 year repayment plans.
While bankruptcy can stay on a credit report for a number of years, its impact on your credit can be much more positive than the impact of months, even years, of unpaid bills. Unlike credit report scams, bankruptcy is viewed as a legal, valid way for individuals to find financial relief.
Credit can be rebuilt after bankruptcy. An experienced bankruptcy attorney can provide advice on important financial decisions and help be a guide on the path to financial stability.
Source: Federal Trade Commission, "Facts for Consumers: Credit Repair," Oct. 2008.