Credit Doctors Often Just a Short-Term Fix for Scores

These days, Jamison is focusing on an even more lucrative opportunity: selling start-up packages to those who want to become credit repair experts themselves.

His web-based system automates the entire process, from finding clients to flagging negative information on their credit reports and generating requests that the credit bureaus remove it. Anyone with $15,000 (the cost of the package) and 25 hours of training can enter the field, he says. "They can learn everything there is to know about the credit repair business and credit scores and almost be a credit expert in a matter of a week." Started less than two years ago, his company, Los Angeles-based Credit CRM, already has close to 200 affiliates using his system.

As lending requirements tighten, hiring a credit repair expert, or credit doctor, to help improve your score in a matter of weeks or months sounds enticing. But consumer advocates, such as Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group, warn that the industry is rife with shady practices and high fees ranging from several hundred to thousands of dollars. "Your money will be better spent paying your bills," Mierzwinski says.

The industry's got a bad reputation, Jamison confirms: Something that he's trying to change by checking references for anyone interested in becoming an affiliate and even testing his business owners on their credit knowledge before he certifies them. While he runs a clean shop and does his best to ensure that his affiliates do as well, that's something he cannot really control.

The problem: Some credit repair shops use loopholes in consumer-friendly laws in ways that only temporarily boost a person's credit score. The most common technique is to dispute negative, but accurate information on consumers' credit reports. A provision in the Fair Credit Reporting Act allows consumers to challenge and remove anything from their credit report that's incorrect, misleading, outdated and unverifiable, explains John Ulzheimer, president of Credit.com Educational Services. If a person finds, say, a paid collection account reported as unpaid or a delinquent credit-card account that they actually paid on time, they can send a dispute letter to the credit bureaus, which then request that the creditor verify the account. Unless verified as accurate within 30 days, the bureaus have to correct the information on the consumer's credit report.

Many credit repair companies know that by burying the credit reporting agencies with dispute letters, they can remove negative items — even if they're accurate, Ulzheimer explains. "If you have a credit report with 15 negative items and send 15 dispute letters, the odds are that some of those 15 letters aren't going to come back — either the data [are] too old to dig out or the data furnisher's response will get lost in the mail," he explains.

The Credit Data Industry Association, a trade group for the credit bureaus, estimates that roughly one-third of the disputes that the bureaus receive are from credit clinics. "Our members tell us that almost all identified credit repair correspondence concerns adverse but accurate data," said Norm Magnuson, a CDIA spokesman, in a written statement.