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Utah credit repair services face lawsuit

(Photo: KSL TV, file)

SALT LAKE CITY – Two Utah-based credit repair companies are being sued by the Consumer Financial Protection Bureau after claims that they used deceptive practices to get people to sign up.

Analysts say there are something customers need to know before they hire someone to fix their credit.

According to CNBC, the lawsuit against Lexington Law and creditrepair.com accuses both companies of using dishonest methods to get new customers.  Plus, they reportedly accepted payment before they were legally allowed to do so.

“In the law, it states you cannot charge for these services up front.  You have to wait until services are performed before you can get paid,” says credit expert Al Bingham.

The lawsuit also claims the companies charged monthly fees of up to $130.

A representative for both companies reportedly told CNBC they were perplexed by the accusations.

Bingham says some credit repair services operate by submitting letters to lenders, disputing certain collections on a person’s credit report and asking that those collections be removed.  However, he believes there’s one big problem with that strategy.

“It’s not up to the credit repair company whether something is removed from a credit report, or not,” he says.

Even when a collection is taken off someone’s report, that doesn’t always last long.

Bingham says, “Maybe they get a collection removed, but it shows up two or three months later.”

He believes the best way to fix a credit score is to create a payment plan based around four things.

Bingham describes them as, “What accounts to close… what accounts, if any, you need to open… what accounts to keep open and use… and what accounts to pay down.”