Having good credit is a meaningful goal for all because our credit reports and credit scores determine numerous financial and other decisions in our lives. Getting a loan, a good interest rate, a competitive insurance premium, and even getting a job can be impacted by your credit report. As we’ll see, there are many ways to build your credit and improve your score with credit repair services.
A low credit score can be debilitating in unpredictable ways, so how can you repair your credit score? What could have gone wrong to lower your score? Can a credit repair service help you?
Let us share with you what to know about credit repair services.
What is Credit Repair?
Credit repair is a third-party service organization or credit services organization that attempts to get bad information removed from your credit reports in exchange for payments. These services are for-profit, and they market their services to help people to improve their credit. Credit repair is legal at the federal and state level, via protective regulations for consumer protection. Whether you do it yourself or hire a service, credit repair itself is not illegal. The Fair Credit Reporting Act gives consumers the right to an accurate credit report, which allows you to start a formal dispute with credit bureaus about any inaccurate or incomplete information.
Credit repair is the process of hiring a company to fix your bad credit. Bad credit is fixed through the removal of inaccurate, negative information on your credit reports. A credit repair company removes inaccurate information by communicating through the credit bureaus. You can do this yourself, but it can be daunting, so many people simply pay a service to do it.
Credit repair services don’t help you to manage your money; services like the National Federation for Credit Counseling (NFCC) and the Financial Counseling Association of America (FCAA) offer credit counseling, which is different from credit repair.
The Credit Repair Organizations Act (CROA)
Practices that are not allowed under CROA include the following:
Advising credit repair customers:
- To make false statements to credit reporting agencies
- To change their identity to prevent the credit bureaus from associating them with their credit information
- Charging credit repair customers any fee for services that have not been rendered
- Guaranteeing that they can remove information from their credit repair customer’s credit reports.
The CROA also requires the services to notify the following to their customers:
- They have the right to dispute their own credit report information for free.
- They can claim the credit repair company if they violate CROA.
- The credit bureaus must maintain reasonable procedures to maintain the accuracy of credit information.
Credit repair services are not allowed to hide notices. These disclosures are provided in a separate standalone form. Credit repair services are not allowed to force you to sign a waiver whereby you would give up your legal rights. Any attempt to do so would be a violation of the CROA.
How do Credit Repair Services Work?
The credit repair services communicate with the credit bureaus, or with services that have reported your credit information to the bureaus. These data furnishers are debt collectors or financial services, like banks and credit card issuers.
The intent of credit repair is to have the credit bureaus delete inaccurate credit information, repair it, or correct it.
The services mainly communicate through the mail for several reasons.
Mailing is a good approach that works with how credit repair services tend to operate. Some credit repair services use a process called jamming. It involves sending repetitive and frivolous mails to the credit bureaus and data furnishers:
If a credit repair company sends a large volume of dispute letters on the same item again and again, then the credit bureau will fail to process the dispute within 30 days specified by the FRCA(Fair Credit Reporting Act).
How much does Credit Repair Cost?
The credit repair services aren’t free. Fees are charged based in these two ways:
- Monthly subscriptions.
- Per item removed from your credit report.
But the fees are charged only once the services are delivered, per CROA regulations.
Monthly subscriptions charge you for services provided for 30 days. The second one will charge after removing your information from the credit file. The exact fees depend upon the service preferred.
Advantages of Credit Repair Services
If a listing is incorrect and removed from your credit report, it will no longer form part of the calculation of your credit score, improving your credit scores by removing negative lists. You’ll have a higher chance of having your future loan application approved, and obtaining a lower interest rate, not to mention all the other benefits of an improved credit score.
When you repair your credit you’ll have the following benefits:
- Lower interest rates
- Qualifying for better services
- Approval for higher limits
- More negotiating power
Verifying Credit Repair Services
You can verify a credit repair company by looking up reviews and understanding what they legally can do.
Here are some warnings to note down:
- Demand payment up-front
- Are unable to answer questions
- Provide misinformation
- Ask you to provide misrepresented information
Even though credit repair is a legitimate service, there are scams in it which you should watch for. The best way to protect yourself is by knowing the characteristics of a legitimate credit repair service, which would not do the things we’ve mentioned above.
Time Taken for Credit Repair Service
The time it takes to see the results from credit repair varies. It is based on your current score, financial situation, and many other factors.
The credit bureaus will take 30 days to correct or remove any inaccuracies reported to them. It still may take a longer time depending upon your situation.
Credit repair is the process of restoring or correcting a poor credit score. Credit repair involves paying a company to contact the credit bureau and point out incorrect information on your report. Then, the credit agency is asked to remove it.
You can do your own credit repair, but it can be a labor-intensive and time-consuming process. Spending money to repair your credit with credit repair services can save you a lot of time in the end.
Because of this, you may deliberate the value of paying for a credit card service: is it worth it? Well, considering that credit affects so many of your life activities, from employment to loans, to eligibility for necessary services, you may determine that it is indeed worth it to correct a credit score that may be lower than it deserves to be, and begin to experience the benefits that an improved credit score makes, such as more access to desirable things, and fewer charges for interest.
Frequently Asked Questions
- How long does credit repair take?
There is no way to predict how long it will take to repair your credit. It is because the credit situation is different for every person.
- What can be removed with credit repair?
They promise to fix your credit by disputing negative items on your credit report, reporting them, and having them removed. Removing negative and non-legitimate or outdated information from your report will move your score upwards.
- Does credit repair affect your credit score?
The cost of a credit repair differs from person to person. It takes several months to improve your report. Your credit score will be higher at the end than at the beginning.