At a time when many are searching for ways to enhance their financial situation, credit repair services may seem like an attractive solution.
Before making a decision about credit repair companies or services, however, it’s essential that you understand their methodology and what can be expected from them.
Credit repair companies can help you dispute errors on your report and negotiate with creditors and credit bureaus to have negative items removed from it.
However, it should be noted that credit repair firms cannot remove accurate information; any items deemed inaccurate by a credit bureau usually will be removed once an investigation has taken place without finding evidence of wrongdoing or unlawful activities taking place on their part.
Equifax, Experian and TransUnion each maintain over 200 million files on consumers each. On an average month these agencies collect information from approximately 10,000 information furnishers–entities which provide consumers’ personal data directly to credit reporting agencies.
Credit repair companies charge fees in exchange for reviewing and disputing any errors on your behalf, which can cause higher-than-needed interest rates on loans and insurance policies, or could affect employment as one-third of employers conduct background checks on prospective employees.
Consumer Financial Protection Bureau reports that more than half of its complaints regarding credit repair companies involve allegations of scams. They caution that some credit repair services make misleading promises or take advantage of consumers by charging unwarranted fees.
Credit repair companies must work within the boundaries of the Fair Credit Reporting Act to effectively repair your credit. If an error on your report is valid, it should be reported back and removed once an investigation has concluded by your bureau.
There are various errors that could appear on your credit report, such as name inaccuracies, incorrect identifying data, public records errors, incorrect account dates and more. An estimated 12-13% of American consumers have at least one error on their report.
Maintaining a good credit score may seem impossible, but raising it is achievable by clearing away inaccurate information from your report. This includes bankruptcies, foreclosures and late payments – any recent ones having an effect may have more of an effect than older ones which have less.
Credit repair companies cannot promise an increase in your credit score; they can only remove inaccurate data from your report. Unfortunately, they can’t alter negative information such as delinquencies or collections that is accurate in your report; so the most effective way to increase it may be by paying down debt and on time.
