Bad credit can make obtaining a home loan or job more challenging, as well as leading to higher interest rates on loans, debt cards and other financial products. But there are ways you can repair and improve your score; many consumers turn to credit repair companies that promise to remove negative information from a consumer’s report in order to help their scores rise higher. But exactly how does credit repair work and do these companies deliver their promises?
Credit repair companies that excel understand what can and cannot legally be removed from your report, how credit bureaus work and how best to work with them to dispute errors. They typically charge both an initial setup fee and ongoing monthly fees to provide these services; though in truth they won’t do anything you couldn’t do yourself, saving both time and frustration along the way.
Credit repair companies usually start their process by obtaining current copies of your reports from all three major reporting agencies: Experian, Equifax and TransUnion. Next they will search your reports for inaccurate information such as tax liens, foreclosures that don’t belong to you or duplicate accounts and will contact the reporting agencies and data furnishers to dispute any mistakes found. Once finished they will typically send you updated reports as they work to correct them on your behalf and send status updates periodically as they strive towards rectifying them on your behalf.
Before federal credit reporting laws were instituted, local agencies maintained profiles on consumers to monitor their borrowing and debt repayment habits. Banks would use these profiles during underwriting to decide whether a consumer should qualify for mortgage, car loan or any other forms of credit. Congress then passed the Fair Credit Reporting Act in 1970 which provided consumers with the right to an accurate credit report.
Credit repair companies do more than dispute inaccurate items on your report – they also provide personal finance advice and tools for budgeting and debt management. Many have been around for decades with great reputations within their industry.
Before selecting a credit repair company, research their history on both the Federal Trade Commission and Consumer Financial Protection Bureau websites for complaints or regulatory actions. Furthermore, download your free report from all three major reporting agencies and carefully read through each one before selecting one for use. Once chosen, choose carefully and be patient; disputes could take several months to resolve before enjoying year-round control over your finances and an improved credit score in the end.
