Credit Cleaning: Credit improvement services aid financial health.

• Author: Barbour, Tracy

A positive credit history is a vital component of being a consumer in today's financial world. Credit affects one's ability to secure loans, credit cards, housing, auto insurance, and even employment. For those who need it, credit improvement services offer solutions that can help people enhance their credit history and financial well-being, offering a welcome reprieve from the no-upon-no consumers with spotty credit get used to hearing when applying for everything from car loans to credit cards.

Credit repair companies primarily help people implement strategies to ameliorate their overall credit worthiness. These businesses, which offer free and/or fee-based services, typically review an individual's credit report and prescribe ways to boost credit through strategic tactics like paying down debt, paying on time, and disputing errors on their credit report. However, the process of credit improvement should begin with consumers having some basic knowledge about credit, says Emanuel Rivero, director of the Hispanic Centers for Financial Excellence at Money Management International (MMI). He explains: "They need to understand what makes up a credit report: 35 percent is based on your payment history; 30 is how much you owe; 15 percent is the length of your credit history; 10 percent is recent applications; and 10 percent is credit mix."

Wells Fargo Greater Alaska District Manager Chris Shockley considers consumer education a key prereguisite for credit improvement. "We've got to make sure that folks understand what credit is and why it's important," says Shockley, who oversees, nine Wells Fargo branches and sixty-five team members on the Kenai Peninsula and in Western Alaska. "It takes education and a good plan to make sure your bills are paid on time, revolving credit isn't used to capacity, and spending habits are kept in check."

A reputable credit improvement business can help people address all of these areas as well as broader issues. However, consumers should be aware that there are debt settlement, management, and consolidation companies masquerading as credit counseling agencies. While debt management businesses are not necessarily illegal or disreputable, they may not be licensed to provide credit-repair services. There are good and bad players in this arena, and consumers should know some of the red flags associated with unscrupulous companies, says Rivero, who oversees MMI's small business, student loan, and web-based counseling programs. He cautions: "If they're asking for payment before they do anything, that's illegal. If they won't send you an agreement to review... If they ask you to do shady things like claim identity theft... or if there's anything that seems dishonest, I would label that as a scam."

Credit Monkey CEO Dion Rostamian suggests using a direct approach to vet an organization's service offerings. "Simply asked them if they are licensed and bonded and what their license specifically covers," he says. "Ask if they are a debt settlement company or a credit repair organization."

The bottom line: Consumers need to be aware of the differences between credit repair/counseling and...