Credit repair refers to the process of improving a poor credit score which might be hindering your ability to secure housing, finance a vehicle, among other things. This poor credit could be a result of late payments, debts, or neglect. You can either choose to repair your credit by yourself or employ a credit repair company. These companies educate you on your credit score and its calculation, and also negotiate with creditors and credit bureaus to remove negative marks and resolve issues, thereby enhancing your credit.
The operations of credit repair companies are regulated by the Credit Repair Organizations Act. This law mandates these companies to inform you of your legal rights, allow you a three-day period to cancel your contract, and disclose the total cost of their services. If a credit repair company fails to fulfill its promises, the law provides you with the option to sue them in federal court, seek punitive damages, or join a class action lawsuit against the company.
Even though you can do what credit repair companies do, they are crucial for individuals who find the process of fixing their credit daunting. Consumers may engage the services of a credit repair company for several valid reasons such as the removal of fraudulent accounts from their credit report, rectification of mismerged credit accounts, and correction of misreported bankruptcies.
Legitimate credit repair companies help consumers by reviewing their credit reports, identifying negative information, interviewing the consumer, and obtaining documents from the consumer to ascertain if any of the derogatory information is false. They then write a letter to the credit bureaus disputing the errors. This letter should clearly identify the errors, briefly explain why the disputed information is false or misleading, and state what the credit report should say instead.
Some of the actions credit repair companies can take on your behalf include:
Before you engage a credit repair company, it's crucial to manage your expectations. While such companies can assist in enhancing your credit score over time, their capabilities are not without limits.
Credit repair companies don't offer services that you can't do on your own. These agencies liaise with your creditors and credit bureaus to better your credit and eliminate negative information. However, you can also undertake these steps independently without incurring the cost of credit repair. You're also capable of negotiating with your lenders directly. Many lenders may not even permit a third party to negotiate on behalf of the customer.
Credit repair companies cannot erase accurate information from your credit report. They may strive to rid your credit report of any false information, but they can't remove negative yet true information. They also can't guarantee the removal of information from your reports.
Credit repair companies might not provide budgeting or financial management advice. These agencies aim to help you eliminate debt and repair your credit, but their services differ from those of credit counseling agencies. Credit counseling agencies adopt a more comprehensive approach to resolving your financial and credit issues, primarily focusing on assisting you in budgeting, better managing your finances, and cutting down on expenditure. However, credit counseling services don't take the same measures to increase your credit score or rectify negative entries on your credit report as credit repair agencies do. It's beneficial to familiarize yourself with both options before making a choice.
You have the right to terminate your contract within three days without incurring any charges or penalties if you regret purchasing the services of a credit repair company, as per the Federal Trade Commission (FTC).
Improving your credit may take time, whether you do it yourself or employ a credit repair company. Credit bureaus have a 30-day window to probe an error and five business days to update you on the investigation's outcome. In some scenarios, it can take even longer. For example, if you've recently obtained a new copy of your credit report and then file a dispute, credit bureaus have 45 days to investigate. Patience and persistence are crucial during this period.
