I understand that many folks out there have interacted with credit bureaus in one way or another. Well, for a large chunk of guys, l believe their experience wasn’t cool.
Maybe, you wanted to apply for a loan, job, or even an insurance cover. In this case, your credit score should be in good health, it is the main determinant for such applications.
Perhaps, you are not conversant with how Credit Repair works, and as a result, you need help.
Now, this is where Credit Repair Companies come into the picture but at a fee.
We are going to cover few points related to the function of companies in question, but first,
What is Credit Repair Services or Company?
A Credit Repair Company helps improve your Credit Score by communicating with lenders, and Credit Bureaus, getting your reports and disputing any negative data or errors on your behalf.
So, someone may ask if Credit Repair Is Legal. Short answer is Yes! they are.
Credit Repair Organization Act (CROA) was enacted to regulate the activities of Credit Repair Companies as well as protect the consumers.
The CROA has outlined some important measures you can take to protect yourself as a consumer. For instance, you can’t pay for services before being rendered. More so, the prospective company should provide you with a written contract.
For the companies, theirs no guarantee that they can delete negative data on your credit report. More so, they shouldn’t sweet talk you to change your credit bureau profile. These are just part of the few measures to help guide and protect you from fraud. You can read more here.
Federal Trade Commission enforces the guidelines in the CROA.
Before you hire any Credit Repair Company to take charge of your credit report and scores, spare some time to get familiar with the Credit Repair Organizations Act (CROA).
You’ll gain knowledge on what to expect when signing up for the Credit Repair Service. In addition, you’ll get to know and understand your rights and where to forward your complaints in case things head south.
For example, CROA states that it is illegal for Credit Repair Companies to charge upfront before services have been rendered. If any company is charging you upfront, please run! that’s a red flag.
What about the cost? well, on average, Credit Repair Companies charge between 25$ to 100$ or shoot to 150$ per month. More so, theirs a setup fee of around 100$. Some charge you per item removed, while some charge a one-time fee.
So, as you can see, it depends, but you know, they always say you get what you pay for. Monthly charges could drain you a big chunk of cash in the long run which of course adds further debt.
If you are on a tight budget, an alternative to fix your credit score headache would be to pay a one-time fee, though the best one would be to fix it yourself. Perhaps, you are unsure if Credit Repair Companies are the panacea for your predicaments, in this case, you need to seek help from Credit Counselors first.
Now, to the main topic,
How Do Credit Repair Companies Work?
They follow 3 steps outlined below
a) Collection of your Credit Reports from Credit Bureaus.
For starters, there are three kinds of Credit Bureaus, they include Transunion, Equifax, and Experian.
Credit Bureaus are companies that contain all of your present and past Credit Data from your lenders. Meaning, past and current debts or loans you owe to creditors and lending institutions are available on Credit Bureaus.
More so, Credit Bureaus take note of how you pay off your loans, if you are a defaulter or not, etc.. they prepare a report and rate you based on that as well as your financial history.
Lenders, Creditors, Landlords, Employers, and Insurance Companies pull your Credit Report from Credit Bureaus before serving you or accepting you.
For instance, when lenders get your Credit Report, they look at the outstanding debts you owe, and the most important data they analyze is your loan repayment. Are you servicing your debts on time?
If your credit score and report are of good health or standing, then you will get loans with good interests. But in case they analyze your report and conclude otherwise, then you will get loans with high interests. A good credit score is considered to be 650 and above
Now let’s say you are considering getting a new apartment for yourself, the prospective landlord may request to check your credit standing and report. The Landlord or Landlady would want to make sure that you can pay rent on time. More so, they check for any outstanding debts like rent, loans, or what have you.
Back to the Credit Repair Companies, they communicate on your behalf and request your Credit Report from the three Credit Bureaus.
b) Analyze Your Credit Report.
They’ll analyze your report carefully similar to lenders or Landlords. They check your financial history like outstanding debts, Bankruptcy, and any negative data or errors that can be disputed.
c) Removal Of Any Errors or Inaccurate Data On Your Report.
Now the third and final step would be to try and correct any errors on your report.
Credit Repair Companies get items removed predominantly by sending out 609 dispute letters inclusive of the errors to Creditors or Lending companies that reported you to the Credit Bureaus. Lenders or Creditors have 30 days limit to prove the item on your Credit Report is correct, or else the Credit Bureau will remove the incorrect item.
But in the event where later the Credit Bureau finds out the removed incorrect item is correct, it wouldn’t hesitate to include that item back into your Credit Report.
Creditors or Lending companies may include banks, Credit Union, Credit Card Companies.
Also, Credit Repair Companies send out letters to Credit Bureaus to remove any inaccurate data. Rectifying any inaccurate data or item may improve your score, though a great way to improve your Credit Score would be to pay all your bills on time and leave a gap between you and your Credit limit.
Credit Repair Companies perform the heavy lifting job on your behalf when you hire them, but be cagey about those which promise instant results or any guarantees.
For instance, it’s quite hectic to delete any negative but accurate data on your credit report. Even if you succeeded, it will always find its way back to your Credit Report.
More so, be wary of those Credit Repair Companies who try to convince you to change your Credit Bureau account to a new account. This is a bit tricky and it won’t work.
Your Social Security Number is what Credit Bureaus identify you with. But some Credit Repair Companies may employ dodgy tactics such as convincing you to change your Credit Account by using other SSN different from yours. You can read more about this here.
You can’t dodge negative but accurate data on your credit report contemplating that you’ll improve your Credit Score. The only way to improve your Credit Score is by paying your bills on time and avoid reaching your Credit Limit.
The Credit Repair process can turn out fishy and so you ought to get familiar with CROA prior to hiring any Credit Repair Company. You’ll get to understand the process and your rights as a consumer.
By now, you should have an idea of how Credit Repair Companies work. But then you can repair your credit report yourself because theirs nothing hard that they do you can’t do for yourself.
In fact, according to Federal Trade Commission, you are entitled to get one free copy every year from the 3 Credit Bureaus.
Getting your Credit Report is the first step towards repairing your credit. Review the report, and if your credit is low, the second step is to seek help from Credit Counselors which are free of charge. From there moving forward, They’ll determine if you need Credit Repair Companies or not.
Let me know this in the comments,
Have you ever research how Credit Repair Companies work?