What is credit repair and how does it work?

Credit repair occurs when a third party, often referred to as a credit repair organization or credit service organization, attempts to have information removed from your credit reports in exchange for a payment. These companies are for-profit and their services are marketed as being able to help people improve their credit. A credit repair company is an organization that offers to improve your credit in exchange for a fee. 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 Eliminating 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 a few months at most. 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 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 shall withdraw it. What might seem like a simple and positive solution to your credit situation is actually a series of false promises that are likely to damage your credit. A number of companies claiming to make credit repairs have emerged over time, and while some may provide services that can help consumers, the real results of their efforts may be questioned. Credit repair companies can investigate such information, but so can the person who evaluates the report.

Credit repair companies make sure you know when these items are recalled, but they don't tell you when they reappear. 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 get results. If you can't or don't want to spend that time, do your research to make sure you'll be working with one of the best credit repair companies. 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 score improves.

Considering that companies working on credit repair legally can't do anything that you can't do yourself, there is always the option of taking matters into your own hands. CROA is the law that defines what a credit repair company is and what it can and cannot do within the limits of the law. Although many companies claim they can clean up incorrect credit reports, correcting misinformation that may appear on credit reports takes time and effort. Taking steps to ensure that payments are up to date or improve the payment schedule for outstanding credit can beneficially affect your credit score.

Remember that even if you pay to have information removed from your credit report, there is no guarantee that your credit score will increase. If your credit report shows a history of debt problems or contains errors, you may consider using a repair service to “clean up” it. Typically, these companies offer to review your credit reports and address any negative elements they can with credit bureaus on your behalf. According to the Federal Trade Commission (FTC), credit repair companies can't legally do for you anything you can't do on your own.


Lorraine Budzynski
Lorraine Budzynski

General sushi practitioner. Hipster-friendly coffee fan. Hardcore tv specialist. Typical tv scholar. Award-winning sushiaholic.

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