Everything You Need To Know About Credit Repair Companies

If you have a bad credit score it could be costing you money.

You can expect to pay higher interest rates on auto and other loans. Your poor credit history will also make it difficult for you to secure almost any type of financing, and this can affect all aspects of your life.

Fortunately you don’t have to be stuck with a bad credit rating for the rest of your life. There are some things you can do to improve your credit score. One way is to contact a credit repair company, but there are some things you should know.

How Credit Repair Companies Started

Companies promising to fix your poor credit score are not new. They have been around since credit agencies first started reporting consumers’ scores and payment histories to potential lenders.

Over the last ten years credit repair companies have become more prominent, and it is almost impossible to avoid seeing one of their ads.

After the collapse of the housing market and subsequent economic crisis in 2008, many people found themselves with more debt than they could manage. Foreclosures, vehicle repossessions, late and missed payments all took a toll on consumers’ credit.

Now that the economy is recovering and people are starting to get back on their feet many are taking a look at their credit reports and scores. While a credit repair company can’t make correct negative information go away, they can help you fix errors that are lowering your score. This will not only make it easier for you to get approval for an auto or other type of loan, but it will also help you save money by avoiding high interest rates.

How Credit Repair Works

A study recently conducted by the Federal Trade Commission discovered that one out of five consumers had an error on their credit reports. Even one small error is enough to drop your credit score several points. This will affect everything from your ability to secure a loan to the amount of the down payment and interest rates.

It is classified as an “error” if it doesn’t meet the following three standards, according to the Federal Trade Commission.

Credit reports must be 100 percent accurate.

Reporting must be fair.

Data must be supported by facts.

If the information contained in all three of your credit reports does not meet the criteria, it is considered an error and steps should be taken to correct it immediately. While you can “do-it-yourself”, sometimes it is best to let a professional take care of repairing your credit.

Credit repair simply means correcting any errors found on your three reports. It is important to remember that only mistakes can be removed, and not negative information that is correct. When an error is identified the credit repair professional will help you find documentation that supports your claim, and work with the reporting agencies to have it removed from your report.

Some of the most common causes for errors to appear on a credit report include,

Bills a former spouse was responsible for under the divorce decree.

Identity theft resulting in fraudulent accounts.

Mistakes made by one or more party responsible for gathering and reporting various credit data. (credit card companies, lenders, debt collectors, etc.)

Once the credit repair company has filed a dispute, it should only take 30 to 45 days to see an improvement in your score.

The reason for this relatively short timeline is to help ensure you don’t have to wait to get the line of credit you need.

What To Look for in a Credit Repair Company

If you believe that there is an error on your credit report, it might be time to contact a professional. While you can dispute errors by yourself, sometimes it is worth it to get help from an expert. They have the time and resources to devote to your problem, and know the specific documentation needed to support your claim.

There are thousands of credit repair companies and professionals to choose from, and not all are the same.

Unfortunately some credit repair “experts” are less than reputable and choosing the wrong one can leave you with the same problems, while still costing you money in fees.

While flashy advertisements promising instant results might get your attention, it shouldn’t be the deciding factor when you are choosing a credit repair company. Some of the things you will want to look for to ensure that you are getting the best service include,

The credit repair company should be aware of your rights, and explain each one to you in complete detail. This should be done before any contracts or agreements are signed. The credit repair specialist should also be able to answer all of your questions to your satisfaction.

It is important that the credit repair company takes the time to understand why you are disputing an item on your credit report. If they aren’t willing to listen to your story, chances are they won’t be able to effectively resolve your problem. You want the credit repair company to make sure that information in the reports meets the required criteria for it not to be considered an error. Otherwise hiring them will be a waste of your time and money.

A top rated credit repair company will be able to clearly explain exactly the type of services they can perform for you. Before you sign the agreement you should know exactly what you are getting, and the type of results you can expect.

If a credit repair company can’t provide and guarantee these three simple things, then you will want to find someone that can.

How To Avoid Credit Repair Scams

With all of the importance that is placed on a credit report, it’s not surprising that there are plenty of scams promising to fix any negative data for one low fee. This is only one of the common credit repair scams, and it is unfortunately easy to fall for any of them.

Some of the common signs that often indicate a credit repair company or expert might not be reputable typically include,

Guaranteeing to erase bad credit information permanently.

Promising to boost your low credit score to a “fair” or “good” rating.

Stating that they can provide same day results.

Promising to erase all bad credit scores from a FICO report.

Even though you have probably seen these and similar ads on billboards, television and other media outlets these are promises that credit repair companies simply cannot keep, and usually indicate that they are only trying to take your money.

No one, including credit repair companies, can remove any information from your report as long as it is accurate.

It is illegal for these companies to use the strategies they are advertising, and in most cases it is also impossible.

According to the Federal Trade Commission there are a few factors that often indicate a credit repair company is dishonest, and knowing what to look for will save you time and money. Some of the things to be cautious of when you are looking for help in repairing bad credit include,

The Credit Repair Organizations Act states that a company or individual cannot charge you until the promised services are completed. This means that you should never be charged upfront.

You are not informed of your rights before signing a contract, along with the steps you are able to take to correct an error for free. You can petition the credit bureaus to remove any mistakes, but in some cases it does help to have the experience of an expert.

If the credit repair company advises you not to contact the three major credit reporting services, it is probably a scam. If you do not have all three of your credit reports, it is impossible to accurately tell if there are any errors.

Since accurate and current negative information on your credit report cannot be legally removed, and company that promises to do so is one that shouldn’t be trusted.

If you are advised to dispute all of the information in your credit reports, regardless of accuracy, it is best if you seek help from a more trustworthy source.

Some credit repair companies will even suggest that you apply for an Employer Identification Number. Using this, instead of your social security number will generate a “new” credit identity and report with a higher score. Not only is this dishonest, it can also be illegal.

Cost of Repairing a Credit Report

The cost of repairing your credit report will vary depending on a few factors. Where you live and the type of services you need all play a role in the cost, along with the company. Fees will vary, and it is important to get everything in writing before you sign any contract.

It is important to note that the Credit Repair Organizations Act makes it illegal for these companies or even a solo professional to charge you before they have completed the job. If a credit repair company ever demands payment before starting work, you will want to report them to the Federal Trade Commission and find someone more reputable.

You should be aware that if you follow illegal advice, you can also be held liable.

It is illegal under federal law to misrepresent your Social Security number, supply false information on a loan application or apply for an Employer ID number in an effort to receive a new credit report. This is true even if you were advised by a credit repair company.

Are Credit Repair Companies Really Necessary?

When it comes to deciding if a credit repair company is really necessary, this will depend on your unique situation. In some cases you can probably dispute an error on your credit report by yourself, but other times you might need some expert help.

If you find that you do need a credit repair company you want to make sure that it is reputable.

The last thing you want is to find yourself in legal trouble, along with being out the required fees. Take your time and make sure that you ask the right questions, and you’ll find a credit repair company that can resolve your problems quickly and legally.