Credit Repair Secrets

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There are 28,000 ways to fix your credit.

At least, that's how many hits I got when I Googled the phrase "credit repair secrets." Most of these, as far as I could tell, offered e-books or services promising quick solutions to bad credit problems. Many hinted at "secrets" that the credit bureaus "don't want you to know." As if Experian and Equifax (NYSE: EFX) actually delight in lousy credit ratings! (They don't care either way, as far as I know -- they just try to be accurate.) Many of the services seemed like the kind that Fool Dayana Yochim wrote about a couple of years back -- high-fee, aggressively sold "debt consolidation" services that might or might not end up helping your credit rating.

One in particular stood out, though. This outfit (I'm not going to name it) offered guaranteed increases in your FICO score for an up-front fee -- 50 points for $499, 100 points for $999 -- with an ongoing maintenance fee of $10 a month. I'm guessing that this company gets its clients' names added to the credit cards of people with really good credit, paying the cardholders a fee for the service. Yes, people really do that.

The quick fix
Because of a loophole in the way FICO scores are calculated, adding a couple of these pristine accounts to a lousy rating can bump it up significantly -- enough to save thousands on a mortgage, for instance. Fair Isaac (NYSE: FIC), the developer of the FICO methodology, plans to make changes later this year that will foil these scams. Meanwhile, they go on. They're even technically legal, for now.

The scariest part of that company's ad? Right below the pricing, this phrase: "Financing available to homeowners!" Let's see. We've got someone who has screwed up their credit rating really badly, and whose finances are probably an absolute disaster. We're going to ask them to put up their house as collateral on a loan to cover the thousand-dollar fee we're demanding to help them out. And we're going to "help them out" not by showing them how to get their affairs in order, but with a legally dubious trick.

Folks, there are names for people like that, but I don't think my editor will let me use 'em here.

Real credit repair secrets
Let's go back to the beginning for a moment: 28,000 hits. Credit "repair" services and books and "secrets" that promise an easy fix are so popular because the right way to fix lousy credit -- the only way that really works -- is hard. It involves facing up to the habits that caused the trouble in the first place, and dealing with the consequences of those habits. It's hard because it involves making plans to pay down debt and sticking to those plans. It's hard because it means living with less -- giving up big credit card spending, and diverting some of your paycheck toward paying off your bills.

The good news: Once you get past those mental adjustments, the rest is pretty easy, especially with the Fool's help. Check out our Credit Center for a comprehensive walk through everything you need to know, or get the crash course with the Fool's quick-and-dirty Get Out Of Debt Seminar. Got questions? Take 'em to our friendly and helpful Foolish discussion boards for great advice from folks who know what's what.

And for the advanced class, consider trying out our Motley Fool Green Light newsletter service. Each month's issue offers great personal finance advice, together with excellent tips that can save you hundreds of dollars. Be our guest free for 30 days -- there's no obligation to buy, and we'll never, ever ask you to pledge your home as collateral.

Fool contributor John Rosevear invites you to send him your comments, questions, and ideas. He does not own stock in any of the companies mentioned. The Motley Fool's disclosure policy is the real deal.