When you have poor credit, it can make it difficult to get loans, credit cards, and even housing. It’s essential to review your credit reports regularly and dispute inaccurate information with the credit bureaus, but it’s also important to understand the difference between legitimate credit repair services and scams. This article will help you avoid falling prey to fraudulent companies that promise to improve your credit score.
Credit repair companies are not allowed to do anything for you that you can’t legally do yourself. The federal Fair Credit Reporting Act states that you have the right to challenge any information in your credit report that you find incorrect or untrue. This includes contacting the credit bureaus directly to dispute the information, but it can be a labor-intensive process. Fortunately, there are companies that offer to do this for you in exchange for a fee.
Unfortunately, credit repair has a bad reputation because of the number of scams that have cropped up around it. These scams often target people who are desperate for help with their debt or credit, and they take advantage of their desperation by making promises that sound too good to be true. Some of the most common credit repair scams include debt relief scams, identity theft protection scams, and mortgage loan modification scams.
Alternatives to credit repair services include resolving issues with your creditors yourself, seeking free or low-cost credit counseling from a nonprofit agency, and adopting responsible financial habits that can help you improve your credit over time. These alternatives require more effort and patience, but they can help you save money on interest charges on loans and other debt payments.
Before standardized credit reporting, local agencies kept profiles on consumers that included borrowing and debt repayment history. Those profiles were then used by banks during underwriting — the process of deciding whether to approve or deny loan applications. After standardized credit reporting was introduced in 1970, it became easier for lenders to access credit reports to verify information about applicants. This led to an increase in the number of people hiring credit repair companies to investigate their credit reports and correct errors.
The first step of the credit repair process involves a credit consultation, typically for a fee. Credit repair services will typically review your credit reports from the three major credit bureaus, Equifax, Experian, and TransUnion, to identify any inaccuracies. They can then help you develop a strategy for disputing the errors with the credit bureaus.
Inaccurate negative information can have a significant impact on your credit scores, causing them to drop by dozens or hundreds of points. These inaccuracies can impede your ability to qualify for loans and mortgages, and can prevent you from getting affordable rates on other types of credit.
The most reputable credit repair services offer a money-back guarantee if you’re dissatisfied with their service. However, these services don’t have any insights into how many customers exercise this option or what reasons they give for demanding their refund. credit repair website