"It's very tough for people to get the best loans at the best rates," Becker says. "It used to be that 700 was a good score. Now 740 is a really good score."
One wealthy client of Becker's, for example, had a tough time getting a loan. His wife had given birth, and the hospital had an outdated insurance plan on file so it kept billing the wrong insurance company. The result: A collection action showed on the client's credit report.
"People think they can [correct] it themselves," Becker says. "But it's not their business." Too often, a client will pay a debt collector to resolve a credit issue. However, once you pay a collection, she warns, it's admitting guilt. "Then we can't remove it [from the credit report]."
Generally, adverse credit information can remain on a credit report for seven years, bankruptcy information for ten years. Information about an unpaid judgment can be reported for seven years after the event took place or according to the state's statute of limitations-whichever is longer.
Although a financial advisor's expertise generally lies in managing money, relying on an outside service for credit issues is controversial. "Credit repair has a long history of abuse and unnecessary costs," says Jon Sheldon, attorney at the National Consumer Law Center, Boston. "A lot of these services do little more than you can do on your own. For example, some repair organizations have form dispute notices that are so standardized that credit reporting agencies ignore them."
The federal Credit Repair Organizations Act aims to protect against credit repair scams. Credit repair organizations must give clients a written statement, called "Consumer Credit File Rights Under State and Federal Law," before the client signs a contract. They must provide a written contract with a client's rights and obligations. Also, a credit repair company cannot:
Make false claims about services;
Charge until it has completed promised services; or
Perform any services until it has a consumer's signature on a written contract and has completed a three-day waiting period. During this period, a client can cancel the contract without paying fees.
The Federal Trade Commission advises that clients make certain a contract specifies:
The payment terms for service, including the total cost;
A detailed description of services to be performed;
How long it will take to achieve the results;
Any guarantees the company offers; and
The company's name and business address.
Meanwhile, a client can find specific instructions on improving a credit report at www.ftc.gov/bcp/edu/pubs/consumer/credit/cre03.shtm.
Consumers are entitled to one free copy of a credit report from each of the three major credit bureaus annually at www.annualcreditreport.com. They also can call 877-322-8228.
The chief factor in improving a credit score is paying bills by the due date. A client can set up automatic payments from a bank account to help, suggests the Federal Reserve, but the account must have adequate funds.