If you’ve ever wondered how credit repair companies work, it’s simple. Credit repair companies aim to improve your credit score by identifying and disputing errors or inaccuracies on your credit report.
How Credit Repair Companies Work
1. Obtain Your Credit Reports
They’ll start by getting copies of your credit reports from the three major credit bureaus (Equifax, Experian, and TransUnion).
2. Review Your Reports
Credit repair companies will carefully examine your reports for any negative items that could be hurting your score. These may include:
- Inaccurate information: Incorrect personal details, accounts that don’t belong to you, or errors in payment history.
- Outdated information: Negative marks that are too old to be legally reported (generally 7-10 years).
- Unverifiable information: Items lacking proper documentation or proof.
- Factual disputes: Credit repair companies typically don’t send tons of generic letters. A good credit repair company will treat each negative account individually, looking for factual information about the account to dispute like a charge-off account that has been sold or transferred to a debt collector but the original creditor is reporting a balance other than $0.
3. Dispute Negative Items
Credit repair companies contact the credit bureaus and creditors (those who provided the information) to dispute the identified items. This involves sending letters and following up with phone calls.
At this point they may use legal language and strategies to challenge the validity of the negative information.
4. Monitor Progress
The progress of disputes is tracked and the company may also keep you informed of any changes to your credit reports.
5. Important Considerations
Legitimate companies can’t guarantee results. Any credit repair company guaranteeing the removal of accurate information from your credit report may be deceiving you.
Can You Repair Your Own Credit
Yes. You can dispute errors on your own for free. Credit repair companies simply handle the process for you. Learn how to improve your credit score along with disputing negative credit items.
But there are legitimate reasons people don’t engage in credit repair and opt for professional help instead, including:
- Understanding credit laws: Navigating the Fair Credit Reporting Act (FCRA) and other regulations can be tricky. Credit repair companies have expertise in these laws.
- Dealing with bureaucracy: Disputing errors involves meticulous documentation, communication with bureaus and creditors, and often persistent follow-up. This can be time-consuming and frustrating for many people.
- Interpreting credit reports: Analyzing credit reports for errors and identifying disputable items requires knowledge and experience.
- Stress and overwhelm: Dealing with credit issues can be emotionally draining. Credit repair companies provide a buffer and handle the stressful interactions.
- Lack of confidence: Some people lack the confidence to advocate for themselves with credit bureaus and creditors.
- Specialized knowledge: Credit repair companies have experience in dealing with various credit situations and may have insider knowledge of bureau and creditor practices.
- While not guaranteed, some people believe professionals can achieve faster results due to their experience and established processes.
DIY credit repair is possible but it requires time, effort, and knowledge. Credit repair companies offer convenience, expertise, and emotional support, which many people find valuable.
What To Watch-Out For With Credit Repair Companies
A credit repair company should be able to explain in detail what they can and can’t do. This should be outlined in their services so you fully understand what you’re getting. Sending out a ton of generic letters may not get you results.
Beware of some companies who make unrealistic promises or charge exorbitant fees. Do your research and choose a reputable company.
How does a credit repair company work
While the method of credit repair may differ from one credit repair company to the next, using a credit repair company involves generic credit dispute letters. The problem with many credit repair company tactics is that accounts are not disputed based on some type of unique credit error or inaccuracy. Generic dispute letters are often sent in massive amounts to the credit bureaus. Disputes should be based on some type of error within the negative listing. Plus, having documented proof to back-up disputes helps tremendously in getting those errors corrected or the getting the negative tradeline deleted. It takes time to review a credit report for errors and inaccuracies. But the time it takes can be worth the effort.
Once a credit repair company spots an error, they should request from you any supporting documentation you might have or need. For example, if there’s a bill on your credit report that your husband or wife was actually responsible for under your divorce decree, you can use that document to prove it shouldn’t be impacting you.
Unfortunately, you fell into the credit repair trap where some companies send tons of generic letters for their clients, without any back-up proof, hoping the original creditors will not respond within 30-days and the account will be deleted.
Credit bureaus get thousands of letters every day. Most credit repair companies use scanning software which identifies template complaints and send a generic response letter without much human intervention.
How to choose a credit repair company
The best way to choose a credit repair company is to ask a few questions during your search. Here is what you should look for:
- The first action a good credit repair company will do is pull your credit reports from each of the three major credit bureaus to pinpoint your unique credit issues.
- Why you need a credit report from all three credit bureaus? Because each credit bureau has its own “data furnishers” (aka lenders, credit card companies, debt collectors, etc.) who report your credit information to them. Each of your creditors don’t necessarily report to all three credit bureaus. And, there may be errors that appear on one of your credit reports, but don’t appear on the others.
- Because 79% of consumers who disputed credit report errors were successful in removing them, you want a credit repair company to offer a unique solution to each of your problem accounts. A generic letter will not work for every credit issue.
- Once those errors have been identified, you’ll then give a credit repair company any supporting documentation.
Steps to repair your own credit
Be your own credit repair company. Learn about credit to insure you and your family are educated about how credit works. It’s best to write your own dispute letter in your own words. This increases the likelihood that a live person will actually investigate your dispute. Generic letters can give you an idea of what to say but always put it in your own words. All I can do is suggest you thoroughly read improve credit scores for 2018. Pay attention to No. 10 – “Strategies to get rid of negative credit items.” You are on the right track in pursuing “pay for deletes.” At the end of the day, if the account is truly yours and it’s reporting correctly, there really isn’t much you can do except wait out the 7.5 year credit reporting time period; pay for delete; or settle the account. Even if you don’t get the creditor or collection agency to agree to a pay for delete, paying the debt will stop the high utilization from negatively impacting your credit scores. Be sure to look at every charge-off account and examine the following:
- If it has been sold or transferred to a collection agency the original creditor’s reported balance should be $0.
- If the original creditor has not sold or transferred the account to a collection agency try to work out an agreement to pay for delete.
- If you can’t get an agreement to delete, paying the debt will still help your scores because the amount owed will be $0. Plus, you can always go back and retry for a deletion with the company. Sometimes it takes multiple efforts to get someone in upper management to agree to a deletion.
- Never attempt to work with a customer representative when attempting a pay for delete agreement. You must research the company, find a street address or email address for someone in upper management, a VP or CEO to work with.
Another tip is if you request validation and the collection agency fails to respond, that’s the complaint you make with the CFPB. A complaint to the CFPB about credit bureaus reporting unvalidated accounts typically goes nowhere. But complaints to the CFPB about a debt collector failing to follow the Fair Debt Collection Practices Act by not providing validation has more traction. But for sure to read the improve credit scores for 2018, it has some helpful tips that you can implement on your own to get your credit back on track.