Credit `repair' could leave you in a fix

Correct negative information on your reports!

Excellent for late payments!

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Credit repair companies, which are rampant on the Internet, appear to be providing a wonderful service. Just imagine -- negative items on your credit report could be wiped out with only a few easy payments.

Keep imagining.

Websites that claim to erase bad credit usually are operating outside the law and seldom get tangible results, according to the Federal Trade Commission and other agencies.

Even credit repair companies that stay away from some of the most bogus of claims -- including promises that they can wipe out legitimate reports of late payments -- break the law as soon as they charge upfront "registration" or "setup" fees.

In all, the FTC has gone after about 70 credit repair companies. Last year it went after 20 of them at once in a crackdown called Project Credit Despair.

Still, that's only a small number of the companies that offer the service, according to the director of the FTC's Midwest region, Steve Baker, who spearheaded the project.

"I remember the head of our consumer protection bureau saying a few years ago [that] she had never seen a legitimate credit repair company," Baker said. "And I don't think we have yet."

Credit repair companies should not be confused with those that do debt counseling, which is a different business (although the FTC and other agencies have gone after some of them too).

The first thing a credit repair company usually does is obtain reports for the client from the major credit reporting bureaus. And for this, they sometimes charge a fee.

If that's all they do, no law has been broken, although they often avoid -- at least on their websites -- letting clients know that the reports can be easily obtained for free by anyone once a year.

But if the next step for "repair" work involves a payment, then the company is violating federal and California laws.

"They can't charge money until the services they promise have been performed," said Gayle Weller, a government program analyst in the California attorney general's office.

"If all they say is that they're going to write letters of dispute for you to challenge some of the negative items in the report, then they can get paid after they write the letters."