When Not to Get Help

Sometimes, capitalism stinks.

Here's a good example. Steve McIntosh, owner of a Texas-based operation called America's Credit Doctor, was recently fined $75,000 by the state attorney general for failing to register and properly bond his so-called credit repair service. Authorities also say he failed to inform his clients of non-profit alternatives for credit help.

You could argue that this clown was an entrepreneur. Maybe even a genius. By preying on human weakness, he generated thousands in profits. He's sleazy, sure. But he's also a capitalist.

And he's not the only one. Perfectly legitimate businesses prey on human weakness all the time. Gambling. Smoking. Payday loans. We call them "sin stocks," and they include Las Vegas Sands (NYSE: LVS  ) , Advance America (NYSE: AEA  ) , and, the smoke-stained king of them all, Altria (NYSE: MO  ) .

Worst of the worst
But these guys are saints compared with credit-repair peddlers like McIntosh. Here's the pitch: Hire us, and we'll help you delete bad marks from your credit reports.

Sounds great, right? Sure. Trouble is, no one can ever guarantee results. Legally, you're only allowed to dispute credit records. Unless you have proof that your creditor goofed, or your creditor is feeling generous, you're probably out of luck.

Legitimate services should point this out long before you sign up. Too often, they don't, asking instead that you pay a "one-time" setup free and hundreds a year to do nothing more than manage disputes for you. It's the best legal scam since lotto.

Listen to the feds
Don't fall for it. The feds have great advice when it comes to credit repair. In fact, the headline of this page from the Federal Trade Commission website says it all: "Self-help may be best." Here are three tips for getting started:

  • Get your credit reports. You can get a free -- yes, free -- copy of your credit report from each of three major credit reporting bureaus once every 12 months. Get started here.
  • Make a list; check it twice. Check your bills and your records. Do you have a canceled check that proves you paid a bill on time that, according to Macy's, was 60 days late? Perfect! Just one hour of comparing your records with that of your creditors may produce inconsistencies that can boost your credit score.
  • Contact your creditors. Once you have evidence of a mistake, you have two options: Contact your credit bureau via a dispute letter, or contact your creditor. My experience says that it's worthwhile to do both. At the very least, make your creditor aware that you've filed a dispute. The creditor may help to expedite the process of clearing your good name.

Follow the money
Want more financial advice? Check out this lengthy article from Motley Fool Green Light co-advisor Dayana Yochim at our Credit Center. It's chock-full of tips for improving your standing with creditors.

And for even more tips, consider Motley Fool Green Light, our personal-finance service, where Dayana teams with co-advisor Shannon Zimmerman to show you how to unlock the fortune hidden inside your paycheck. You'll find nearly $500 worth of advice in the July issue. Get your copy and 30 days of unfettered access to the service, free, right now. There's no obligation to subscribe.

Fool contributor Tim Beyers writes weekly about personal finance and investing basics. Have a Foolish money tip? Tell him. Tim didn't own shares in any of the companies mentioned in this article at the time of publication. Tim's portfolio holdings can be found at his Fool profile. His thoughts on personal finance, Foolishness, and investing in general may be found in his blog. The Motley Fool's disclosure policy would like to give you extra credit for reading this article.

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  • Report this Comment On August 14, 2008, at 12:47 AM, nofaxpaydayloan wrote:

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