What's the difference between credit counseling and credit repair?

by MPA08 Mar 2016

This is another question we received previously when we held our "Ask The Consumer Credit Attorney" webinar through OriginationPro's Certified Mortgage Advisor Program. This webinar featured guest speaker Bob Willis, attorney and founder of Credit Repair Resources. The question is: What is the difference between credit counseling and credit repair?

Credit Repair/Credit Service Organizations. These are companies that will assist consumers in contacting the credit reporting agencies and data furnishers to have inaccurate, outdated and erroneous information removed or corrected. Legitimate credit service organizations, or CSO’s, apply consumer protection laws like the FCRA and FDCPA as well as their knowledge of credit reporting in the consumer’s best interests. These clients typically have been through a major economic event and may need extensive work on their report. The process of credit repair may take months and therefore this type of service is not for someone who is expecting to go to closing in a few weeks.

Consumer Credit Counseling/CCC. The practice of credit counseling involves the renegotiation or restructuring of debts owed by clients to have lower payments and or lower interest rates. This is a viable and legitimate option for consumers that are overexposed or maxed out on debts. Unfortunately, while this service may be helpful, it may result in a lower credit score and prevent the consumer from obtaining a home loan until they have shown 12 consecutive on time payments. Often this practice is confused with credit repair.
--Dave Hershman

Dave Hershman has been the leading author and a top speaker for the industry for decades with six books authored and hundreds of articles published. His website is www.originationpro.com. If you have a reaction to this commentary or another question you would like answered in this column? Email Dave directly at [email protected].