How Credit Repair Works
Maintaining a good credit score is a goal for many of us. It is because credit reports are directly influenced by our financial decisions that directly impact our lives. Whether getting a loan for home buying, interest rates, an insurance premium, or even getting a job is somewhat dependent on our credit report.
Now those who are already having poor credit scores and reports, credit repair can work as a way to clear their credit problems. There are, however, various ways to rebuild your credit.
What is Credit Repair?
Credit Repair is simply converting your bad credit into a good credit in any way, shape, or form. However, most of the time people while using the term “credit repair” are referring to the process of disputing errors on credit reports.
You can follow the dispute process for free with your credit bureaus on your own. Here, you can file a formal dispute with the credit bureau in question. Formal dispute asks you to provide detailed information on the error and also to include any supporting document with it.
Most of the time people do not have enough time to do their own credit repair. They also are not well aware of how to make their case. Therefore, they search for hiring a credit repair company to dispute errors for them. These companies charge accordingly according to the work offered. Sometimes an extra help from these companies is highly valuable. For example, in case you are having multiple errors across different credit reports or you have been suffering from identity theft.
Some credit repair companies urge their services to help consumers and remove wrong and unverifiable information from their credit reports. However, the reality is that these companies try to remove the negative information from the credit reports before it would naturally fall off a credit report.
How Does Credit Repair Work?
A credit report should be 100% accurate, fair, and fully proved.
Repair your Credit History
The credit repair companies look upon your credit bureaus and creditors to remove the negative report items that can affect your credit score. They take complete responsibility for your credit history whether it is up to date, accurate, and reflects your finances.
Monitor your Credit Profile
The credit repair companies completely monitor your credits 24×7 and stay aware of the changes and updates on the reports. They also provide full customized information and give advice on how the reported items can affect your score.
Build your financial future
These companies offer well-customized tools and proven technologies that can guide you with the tasks and actions you need to perform to maintain a healthy score and reach your credit goals.
Let us understand with the help of an example when a reputed credit repair company can help you achieve something which you cannot fulfill yourself. If you are possessing a collection account that has been sold to multiple debt collectors then it can be shown on your credit report multiple times. That information is 100% correct but having one debt can beat your credit score multiple times.
There are more errors in your credit report than you think. If you have some information on your credit report that is not accurate, fair, and verified then you should think of considering credit repair. You can either perform it yourself (DIY) or hire a professional. A study has found that every 1 in 5 consumers has an error on at least one of their credit reports.
How To Judge A Credit Repair Company?
There are several ways in which you can verify a credit repair company to improve your score-
• Initially, you should go through the reviews of the company on various official platforms.
• You should explore the Consumer Financial Protection Bureau’s complaint database.
• At last, you can do an additional search for various user reviews. You should keep in mind, the reviews given by the users are most useful.
The Credit Repair Organizations Act
The federal Credit Repair Organizations (CROA) Act clearly describes what is a credit repair organization and how these companies must operate legally. This Act was passed in 1996, which clearly mentions what credit repair companies must do and must not do to meet the requirements of the federal law.
These companies should not follow certain things under the CROA-
• They should not suggest their customers making wrong statements to these agencies.
• They should not suggest their customers modify their identification to avoid credit bureaus from associating them with their credit information.
• They should not charge their customers any fees for the services that have not been provided.
• They should not guarantee to remove information from their customer’s credit reports.
The Act also states to notify their customers of the following things-
• They have the complete right to argue for their report information for free.
• They can take legal actions against the company if they violate the Credit Repair Organizations Act.
• They must maintain reasonable procedures to keep the accuracy of credit information or mistakes that may occur.
Credit repair companies are forbidden to hide these pieces of information within the language of their contracts. All the disclosures should be given in a separate form. Moreover, these companies are not allowed to force the customers to sign anything that can violate their rights. If found doing so, it would be a violation of the Credit Repair Organizations Act.
What Do Credit Repair Companies Do?
Ultimately, the main objective of any credit repair company is to talk on your behalf with other credit bureaus. However, most of the time, these data furnishers are financial services companies like banks and credit card issuers.
Their job is to have these furnishers either delete or modify the credit information in some or the other way making it favorable for the customer. However, you can reach the credit repair companies through the internet, phone, mail. Just to inform you that U.S. mail is the best and most preferred method by these companies for various reasons.
Although mailing letters to the bureaus may look a little ignorant, it is the best approach that most companies tend to operate with. Moreover, some companies perform a process called jamming. It includes sending repetitive letters to the credit bureaus and their data furnishers.
The Credit Repair Process
There are various steps to be followed in order to complete the credit repair process.
• First, you have to apply to the credit reporting agencies to get a copy of your credit report. Although it can take around 30 days to get your report back, usually it is done only in a few days.
• You have to go through the report from top to bottom and find if there is any incorrect information. It can include arrears, defaults or other credit applications, Debt agreements, and other report requests. Any of such things may impact your credit score negatively. Therefore, make sure there are none of these.
• If by chance, the credit reporting agency has made some mistake (like personal information or listing the debt twice), you can urgently contact that particular agency to correct the information.
• However, if a creditor has given the wrong information then in that case you should get in touch with the creditor and ask the information to be removed. If they find that the listing is wrong, they will ensure that the credit reporting agency will update your report.
How Much Credit Repair Costs?
In general, the credit repair companies charge in two ways. The first method is garden variety subscription service and the second one is pay per delete.
In the garden variety subscription method, the credit repair company charges you from your credit card at the end of every month for the services performed. Their service lies between $50 to $100 per month, however, there may be exceptions. They try to keep a financial incentive with this subscription fee structure to maintain you as their permanent customer as long as possible.
In the second method, the company only charges you when an item on your credit card is actually deleted. This method is well suited for the customers because they are only asked to pay for substantial results. This also does not violate the Credit Repair Organizations Act as the customers do not pay until the final results have occurred.
Does Credit Repair Work?
Some Credit company claims that they have removed millions of negative credit entries. Although there are not any reliable statistics available which proves the effectiveness of these credit repair services. Moreover, until now there are not any statistics available that can prove the direct result of the customer’s average credit scores.
Finally, to conclude there is no such thing that a credit repair company can do, and you cannot. Therefore, it is always recommended to ensure the correctness of your credit reports yourself. Doing by yourself is completely free. Moreover, the most important point is the accurate negative information in your report will be automatically removed after a period of 10 years.