Legitimate credit repair companies can ensure that inaccurate information is removed from your credit reports so that it doesn't hurt your credit rating. However, they can't do anything for you that you can't do for you if you're willing to put in time and effort. Credit repair is the process of hiring a company to correct your bad credit by removing inaccurate and negative information from your credit reports. Unfortunately, none of those promises are true.
Credit repair companies offer to “fix your credit” by removing negative elements from your credit report. They offer to file disputes about negative items on your behalf with credit bureaus and have them removed. What is the problem with this approach? The whole strategy is based on taking advantage of a legal loophole in the credit system. When accurate items are removed, it is only temporary, at best, a few months.
How Credit Repair Companies Work The most common way that credit repair companies work is to dispute all the negative elements that appear on your report, whether they are accurate or not. Because the credit bureau has 30 days to investigate, this random dispute method may produce positive results temporarily. During the consultation, the items in question will not be included in the credit rating and a notice will appear under each disputed item. If the creditor does not respond with proof that the item is correct, the credit bureau will withdraw it.
A credit repair company is a third-party service that contacts credit reporting agencies on your behalf. In exchange for a fee, the company will remove inaccurate or negative information and help you improve your credit over time. Credit repair companies are organizations that claim to help consumers improve their credit in exchange for a fee. Work with credit bureaus and creditors on your behalf to eliminate errors from your credit report.
While many of these companies are scams, there are legitimate credit repair companies. This is where the credit repair service asks you for an Employer Identification Number (EIN) from the Internal Revenue Service, which has the same number of digits as a Social Security number. There can be a lot of back and forth, but the ultimate goal is to remove negative information from your credit file so that your credit rating improves. The Credit Repair Organizations Act requires companies to provide you with a firm total of costs and an estimate of how long it will take to achieve results.
Keep in mind that there is nothing a credit repair company can do for you that you can't do on your own. The first is that if the information that the credit repair service is disputing is really correct, they will report it again the next time they send data to the agencies. By law, you are entitled to a free credit report every 12 months from each of the three major national credit bureaus: Equifax, Experian and TransUnion. This can happen when creditors report misinformation to the credit bureau or if an identity thief takes out credit in the consumer's name.
A credit card company will review your credit report information for you and look for any errors. Since buying a home is such an important decision, it might also be worthwhile to enlist the help of credit repair professionals. Historically, mail has been the preferred method for credit repair companies for several reasons. If the only negative notes on your credit report are errors that can be successfully disputed and eliminated, you're likely to see an improvement in your credit score fairly quickly.
You are legally entitled to receive a free credit report each year from the three major credit bureaus (TransUnion, Equifax and Experian). Credit repair companies are not allowed to hide the above notices in the language of their contracts. And finally, credit repair companies are not allowed to force or entice you to sign a waiver whereby you would waive some or all of the above rights. Credit scores are calculated based on information in the consumer's credit report, and sometimes that information is inaccurate.