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Media > Newsletters > Consumer Advocate > February 2018 > Know More About Credit Repair and Debt Settlement Companies

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Know More About Credit Repair and Debt Settlement Companies

Some services advertise that bad credit can be erased or your debts can be settled, but it takes a watchful eye to tell the legitimate services from the scam artists.
Credit Repair
Some for-profit “credit repair” services charge hundreds or thousands of dollars but do little or nothing to improve your credit. The reality is that they cannot erase negative information from your credit report if the information is accurate. With certain exceptions, negative information can generally remain on your credit report for up to seven years.
Here are some questions to ask credit repair companies before signing up for any of their services: 
  • How much do the services cost? 
  • What do you offer that I can’t do myself?
  • What proof will you provide that you are negotiating with my creditors?
  • What are your cancellation policies?
  • Are you in compliance with the Ohio Debt Adjusters Act
The Credit Repair Organization Act – enforced by the Federal Trade Commission – and a similar Ohio law make it unlawful for a credit repair company to lie about their supposed benefits or to charge you before providing services.
Debt Settlement
Debt settlement companies typically offer to negotiate with creditors on your behalf. They may try to advocate for you to be able to pay one lump sum that is less than your total debt. To save up for the lump sum, you are typically asked to set aside an amount each month in an escrow account as the company negotiates with your creditors. The debt settlement company may tell you to stop making monthly payments and try to get the creditors to accept the lump sum. 
Be very leery if a debt settlement company asks you to pay upfront fees. Debt settlement companies are only allowed to charge fees based on the debt they have successfully settled on your behalf. This amount should only be a portion of the company’s full fee.
Some of the potential risks involved in a debt settlement company’s process include:
  • The programs may require three years or longer of monthly payments to achieve the needed lump sum. Some consumers having trouble making ends meet may not be able to keep up with those monthly payments.
  • Your creditors may reject the debt settlement company’s attempt to negotiate the settlement. Some debt settlement companies try to settle your smaller accounts first, while interest and fees continue to accumulate in your larger accounts.
  • If you’ve been convinced to stop making monthly payments to your creditors, you may get hit with a lower credit score, along with potential late fees and penalties.
  • You may end up paying more for the services provided than what you’re saving in having your debt negotiated. 
If you are having trouble paying your bills, you may want to first contact your creditor directly. You may be able to arrange a payment plan yourself at no cost. You can also contact a nonprofit credit counseling service in your area. Look for a service at or by calling 800-388-2227. If you decide to contact a debt settlement company, research the company first with the Ohio Attorney General’s Office, check online for reviews, and look for previous lawsuits brought against the company. 
Consumers who suspect a scam or an unfair business practice should contact the Ohio Attorney General’s Office at  or 800-282-0515.