Pay-for-elimination arrangements are legal under the Fair Credit Reporting Act, but there are a few things you should know. First of all, creditors are not obliged to comply with your request and eliminate cancellations of your credit. So, while you can request an elimination payment, there is no guarantee that a creditor or debt collector will agree to it. Having a chargeback removed from your credit report can make the difference between qualifying for a home or car loan.
Future lenders want to make sure you pay your debts. This is where hiring a credit repair company can really make a difference. Only credit bureaus have the power to remove something from your credit report. Not even your creditors have direct access to your credit file.
If a credit repair company announces the “guaranteed removal of any element of your credit report,” it should be a red flag. This can happen on an auto loan or student loan, with a credit card issuer to which you owe credit card debt, or other types of personal loans. While this can save you time, there is usually a fee to be paid, and in most cases, the credit repair company can't do anything for you that you can't do on your own. This is because a cancellation can only lower your credit score by 20 or 30 points if you already have a poor credit history.
You are entitled to a free credit report from each of the three major credit bureaus every 12 months. If credit reporting agencies are unable to verify the entry, they will have to correct or remove the charge in accordance with the Fair Credit Reporting Act. Because the canceled account will continue to appear on your credit report, it will continue to affect your credit rating. If entry cannot be verified, credit reporting agencies are required to correct or eliminate the charge in accordance with the Fair Credit Reporting Act.
Technically, negative credit information that is accurate can legally remain on your credit reports for seven years, and some types of negative information can stay even longer. Annotation can hurt your credit ratings and can make it difficult to qualify for new credit in the future (especially at an attractive interest rate). Even if the statute of limitations expires after three or five years in your state, your credit report will still show cancellation and your credit rating will suffer. In addition to your credit score falling, you'll also be struggling to get approved for any new credit card, mortgage, or car loan.
Even if you get a loan or credit card, you're likely to pay higher interest rates than if your credit were up to date. If you find any errors in your credit report, you'll want to challenge them directly with the credit reporting agency. Your credit score is important for buying a home, getting a car loan in your name, or simply opening a credit card account. Depending on which credit bureaus a debt collector or creditor depends on, a cancellation may appear on just one or all three credit reports.
A professional credit repair specialist will be able to advise you on the best course of action if you are not sure how to proceed.