Credit Repair Scheme Promises Fast Score Increases But May Be Illegal
Establishing a good FICO credit score isn't all that difficult; all you have to do is pay your bills on time. But if you have a bad credit score from a history of not paying your bills promptly, repairing your score and building it up to a level where you can get competitive loan rates can take time. It can take several years of paying your bills on time to build up your score and it can take seven years to wipe out a judgment or a bankruptcy from your credit report. Most consumers, understandably, would rather not wait that long and there is not shortage of companies that promise to repair credit quickly.
Several companies are offering dramatic increases in credit scores of up to 200 points in as little as 60 days using something known as "seasoned credit." The concept is simple - if you are added to the credit account of someone with good credit as a cosigner, that good credit will add to your own credit score. What these companies do, for fees ranging up to $5000, is arrange to add your name as a cosigner to the accounts of willing participants who have good credit of their own.
Adding a cosigner to an account isn't illegal; husbands and wives add each other to their own accounts all the time. What is illegal about this scheme is that it is a deliberate effort to manipulate credit reports and credit scores. If it is done for purposes of qualifying for a loan for which the borrower otherwise wouldn't qualify, such as for a mortgage, it constitutes fraud.
In addition to the questionable legality of the practice, there are some other reasons why this sort of credit "repair" should not be attempted. The idea of having someone else's credit rub off on you works both ways. Customers of these companies have no idea whose accounts their names are being attached to, and if those customers stop paying their bills, then their credit score will go down along with yours. None of this is under your control; you are stuck with whomever they stick you with. Since these companies advertise that once your score increases, you can become part of their "good credit network", it only stands to reason that you may have your name attached to that of a person who only recently had a bad payment history, too.
Increasing your credit score by 200 or more points in 60 days' time sounds like a great idea. But the risks of paying someone thousands of dollars to do it for you are great. It is better to build your credit the old fashioned way by taking your time.
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