What is Credit Repair?

You probably already know your credit score but might not know how this three-digit manifestation of your credit health can affect your life. Without a good credit score, you may struggle to get your own apartment, buy a home, get better interest rate on your loans, or get a good finance deal on a car, and that’s just the beginning.

The information on your credit profile doesn’t always tell the whole story — through no fault of your own, this information can be incomplete or even inaccurate. If your credit has been damaged due to late payments, debts in collections, or neglect, credit repair may be exactly what you need. You can do the repair work yourself, or you can choose to hire a firm to help. A good credit repair company can work as your advocate, providing you with counsel regarding your credit score and how it’s determined. They also work to improve your credit score on your behalf, usually by negotiating with creditors and credit bureaus to remove negative marks, resolve issues and help you repair your credit — once and for all.

For your protection, credit repair companies are governed by the Credit Repair Organization Act (CROA). This law requires credit repair companies to take certain steps such as informing you of your legal rights, giving you three full days to cancel your contract with them and letting you know the full costs of their services upfront. The law also gives you options if a credit repair company doesn’t live up to their promises, including the ability to sue them in federal court, the ability to seek punitive damages, and the right to join a class action lawsuit against the company.

If you’re ready to repair your credit, a credit repair agency can help provided they are reputable. Keep reading to learn more about how these companies work and what to expect. Click here to see reputable credit repair partners in your area.

What do credit repair companies do?

While credit repair companies don’t have the legal power to do anything you can’t do yourself, they do play an important role for people who feel overwhelmed trying to fix their credit themselves. There are legitimate reasons consumers may turn to a credit repair company, including getting fraudulent accounts removed from their credit report, amending credit accounts that belong to someone else, and accounts in bankruptcy that are misreported.

Legitimate credit repair providers assist consumers by reviewing the consumer’s credit reports, interviewing the consumer, identifying information which is adverse to the consumer, and obtaining documents from the consumer to determine whether any of the derogatory information is false.

From there, they typically prepare a letter to the credit bureaus disputing the errors. The dispute letter should identify the errors with specificity, briefly explain why the disputed information is false or misleading, and state what the credit report should say instead.

While a dispute letter is almost always used as a measure to move toward better credit for the consumer, additional strategies that credit repair companies take to fix client’s credit can vary depending on client’s unique situation and credit woes.

Some of the steps credit repair companies can take on your behalf include:

  • They may help you get a copy of your credit report from the three credit reporting agencies – Experian, Equifax, and TransUnion. They will go over your credit report to determine what problems exist and the best course of action to fix them.

  • They may help you utilize federal consumer protection laws to protect you and your credit from unfair debt collection practices.

  • They may analyze your credit score and offer targeted information that can help you improve your credit score as you progress through their program.

  • They may negotiate with your creditors on your behalf.

  • They may dispute any information you feel is inaccurate on your credit report with the goal of having negative information removed altogether.

  • Credit repair agencies may also help consumers fix incorrect credit limits that can inflate or skew credit utilization and adversely impact a consumer’s credit score.

What do credit repair companies not do?

While having a third-party company handle all your credit issues for you may sound ideal, it’s important to keep your expectations in check. Credit repair companies can absolutely help you improve your credit score over time, but they do have limitations.

Credit repair companies can’t remove accurate information from your credit report.

While credit repair companies may work hard to get your credit report clear of any negative information, they cannot get accurate negative information removed from your report. Thanks to the fact credit repair organizations are overseen by the Credit Repair Organizations Act (CROA), they also cannot promise to have information removed from your reports.

They may not offer budgeting or money management advice.

While credit repair agencies have the goal of getting you out of debt and repairing your credit, they don’t offer the same services as credit counseling agencies. Credit counseling agencies offer a more holistic approach to solving your money and credit problems, focusing most of their efforts on helping you make a budget, manage money better, and reduce spending.

On the flip side, however, credit counseling services don’t take the same steps to boost your credit score and fix negative marks on your credit report as credit repair agencies do. Before you choose one service over the other, it helps to educate yourself on both options.