Home Finance How Do Credit Repair Companies Work to Clean Up Your Credit Score?

How Do Credit Repair Companies Work to Clean Up Your Credit Score?

Credit Repair

Are you thinking about buying a car or a house? You’re excited about this next phase of your life but unfortunately, that voice in the back of your mind keeps saying ‘credit score’. Do you even know what your credit score is today? It’s worth finding out especially considering around 5% of people pay higher interest rates than they need to. This is due to errors on their credit reports, according to a Federal Trade Commission report. Therefore, a credit repair company can suddenly become your best friend.

What is a Credit Repair Company?

  • Work on your behalf to check and amend your credit report
  • Support you through any credit disputes

Clearly, these companies exist to help you improve your credit score. They do this by managing the process to dispute and clean up any mistakes on your credit report. There’s nothing stopping you from doing it yourself but any legal process can be overwhelming. Furthermore, a credit repair company knows the language and best approach to use thanks to their expertise.

It’s worth noting though that you should be wary of any scams and especially of companies claiming that they can deliver more than is possible. For example, a credit repair company can only dispute mistakes on your credit report. They can’t magically change it to a better score and nor can they remove legitimate issues with previous payments.

What Causes a Bad Credit Score?

  • Late payments
  • Unpaid credit or store cards

Some people assume that having had debt can make them look bad when it comes to credit scores. However, as long as you followed your agreement and paid all your payments on time then you’ll have no issue. In fact, it can make you look good because you were a good debtor. After all, this is how lenders make their money.

Credit and store cards can be the worst when it comes to credit scores. Again though, they can also work in your favor if you’ve paid for everything regularly and on time. Essentially, a credit score tells lenders how reliable you are when it comes to meeting your payments. This then gives them the confidence to lend at a lower interest rate. If they feel you will be a risky debtor then they’ll charge you more interest rate to cover that risk.

However, you should also note that you’ll get a better credit score if you use only 10% of your credit limit. The amount of time for which you’ve had your cards and accounts is also a factor.

Process Followed by a Credit Repair Company

The process itself, as listed below, is relatively standard although various companies will follow slightly different strategies.

  1. Obtain credit reports
  2. Check for errors
  3. Raise and resolve disputes
  4. Follow Up Strategy

Credit Reports

The first thing any credit repair company will do is to get your credit report. In the US, there are three main national credit bureaus: Equifax, Experian, TransUnion. These are legally obliged to give you your report every 12 months when you ask for it. Remember though that each one might have a slightly different report based on what your creditors reported and to which one.

Confirm Errors

Once the credit repair company has your reports then they will work with you to review everything for any issues. Errors can appear simply because of human mistakes from your creditors. They can also come up if you’ve had any fraud on your accounts. Another reason is if you’ve suffered from identity theft.

Disputes

Once a credit repair company has all your potential errors then they will dispute these on your behalf in order to have them removed. If you were acting on your own then you could follow the Federal Trade Commission (FTC)  process detailed on their website. The advantage of a credit repair company though is that they can follow some steps before dealing with the FTC. They would do this by engaging with your previous creditors and auditing their approach with regards to your account.

Follow Up

Depending on the response, a credit repair company will then work with the creditors and bureaus and follow through with any disputes and litigation that may be required. Once this is all complete, you’ll essentially have a clean credit report although of course, this can’t remove any legitimate payment delays you might have had in the past. In those cases, a good credit repair company will then work with you to develop a strategy to improve your credit score over a period of time.

Final Thoughts on How a Credit Repair Company Works

A credit report can be a scary and overwhelming piece of the document but it doesn’t have to be. Furthermore, dealing with bureaus and legal processes can also be mind-boggling. Luckily for you though, you can work with a credit repair company that can take the stress away. They’ll work with you to clean your credit reports and propose a strategy so that you can build a great credit score for the long-term. We all make mistakes in our past but we can learn from these and improve ourselves as well as our credit scores. Don’t despair and you’ll be able to buy your dream house or car in no time at all.

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