how do credit repair companies work

How do Credit Repair Agencies Work?

Credit score plays a significant role in processing and approving an application for a loan/credit card. A lower score can negatively impact your application and there will be chances of rejection of loan approvals. In such cases, you have to improve your score to avoid further financial problems. So, how can you repair your credit score? What could have affected your credit score? Can a credit repair agency help you? Of course yes!

Let’s see in detail how credit repair can be done by credit repair agencies

What does this mean for credit repair?

Credit repair is a process of correcting or rectifying your credit score by filing a dispute with the assistance of a credit repair agency. While opting or a credit repair, you have to provide a detailed explanation of your debts and supporting documents.

What is Credit Repair Agency?

A credit repair agency is an entity, which helps clients to improve their bad credit score. In general most of the consumers may not have the required knowledge or time to file their disputes for correction of credit score. Such customers can take the assistance of credit repair companies to file their disputes.

Note: It is recommended to verify a credit repair agency’s authenticity before providing your personal information to them. There are a number of agencies that are not authorized according to the Federal Trade Commission; those types of companies intend to scam customers.

How to verify a Credit Repair Company?

There are several kinds of ways to verify the authenticity of a credit repair agency. Here’s somewhere to start:

  • Read company reviews on the Better Business Bureau website
  • Check the database of complaints on the Consumer Financial Security Bureau
  • Look for additional review websites for valuable consumer feedback

Also, check this: If the company claims it can do all of the following, it is a red flag and possibly a sign of a scam:

  • Removal of exact negative information from your reports
  • Legally create your new credit identity
  • Guaranteed improved credit

How do Credit Repair Firms Work?

Most of the credit repair companies start by asking for a copy of your credit report from each of the three major consumer credit bureaus -Equifax, Experian, and TransUnion. Then the company will review your credit reports regarding derogatory marks, such as charge offs, tax liens, and bankruptcies. After identification, it will set up a plan for disputing errors and negotiate with creditors to remove those items. That plan may involve sending:

  • Requests to correct the information
  • Letters to dispute the negative marks on your credit report
  • Cease-and-desist letters to debt collectors on your behalf

Note:  While the credit repair process, the firm may also recommend that you apply for new accounts to add positive information to your credit reports. Be careful here. If you have had trouble handling credit in the past, the best option is not to apply for a new account.

How much does it cost to repair credit?

The amount you are going to pay and how it is calculated will vary depending on the credit repair company, but there is a law they have to follow. You could pay a one-time flat fee, depending on the company, or pay for each derogatory mark removed from your credit reports.

Points to be noted

  • A credit repair agency can not explicitly remove or change the details in your credit report.
  • On credit rating agency websites such as CIBIL, the online dispute resolution process is available at no charge.
  • Any modifications to your credit report must be approved by the bank/financial institution.
  • Even if you apply through an agency for credit repair, the final credit report will be sent only to the consumer at their email address or postal address. The information in the credit report is confidential and won’t be shared with others.