Unless you’re preparing to make a big purchase like a car or a house, most times we don’t think about our credit report or FICO score. Maybe an occasional credit card, but for the most part your credit status is on the backburner.
If you’re planning on making a big purchase in the near-term and have reviewed your credit report, you may have noticed things that have caused you concern. You may have inaccuracies such as late payment, wrong accounts, or other things that are negatively impacting your score.
You may be wondering what options you have, if any, to get things fixed. In your research you may have come across credit repair companies that offer to assist you with getting your credit back on track for a fee. So what are credit repair companies all about?
WHAT IS CREDIT REPAIR?
The first questions many people as is what is credit repair? Credit repair is the process of correcting a low credit standing that may have resulted for a variety of reasons, including:
• Identity theft
• Incorrect personal information
• Accounts that belong to someone with a similar name
Credit repair happens through the process of identifying the damaging information in your credit report and disputing it with one or more of the three major credit bureaus (Experian, Equifax, and Transunion). This can be a time-consuming process as the credit bureaus will typically have 30 days to respond once an inquiry has been made.
WHAT DOES A CREDIT REPAIR COMPANY DO?
Although they have 30 days to resolve a dispute, the credit bureaus do not have to investigate submissions that they deem to be frivolous.
A reputable credit repair company can help you to identify the information on your credit report that does not accurately reflect your financial history. They will then head up the process of filing disputes with the various credit bureaus and then following up as necessary until all information that can be corrected has been updated.
Credit repair companies typically employ attorneys who are licensed in one or more states and authorized to act on your behalf.
IS CREDIT REPAIR A SCAM?
Like many types of companies on the market, there are good and bad companies out there. The question of is credit repair a scam is a the top of many people’s mind when they think of getting help. You will definitely want to watch out for companies that are just out for your money. There are some red flags that you can watch out for to help you avoid getting taken for a ride.
• You are not required to sign a contract, or the contract is missing key details such as the cost of the services to be provided and what services will be rendered
• You are asked to make payment up front before any services have been rendered. Another example would be having you to claim identity theft when none has occurred.
• A company promises to provide you with a new credit profile by setting up a new social security number or federal employer identification number on your behalf.
• Companies that ask you to do things that are unethical such as disputing information that is accurate
• You are not provided with any information letting you know that you can repair your credit on your own at no cost
• The company encourages you to never contact the three major credit bureaus directly
* They promise a prove system to repair credit
Some of the tactics that these companies engage in are illegal and can get you into a lot of trouble. It is a federal crime to provide false information on credit applications which could mean you could be prosecuted for fraud. So beware!
WHAT KINDS OF THINGS SHOULD A CREDIT REPAIR COMPANY PROVIDE?
A credit repair company should provide you with a copy of the Consumer File Rights Under State and Federal Law before you sign up for services.
Before you begin services, you should also receive a contract which at a minimum should include:
• The terms related to payment for services, including the total cost to be paid
• The anticipated amount of time it will take to achieve results
• The company’s business name and address
• Any guarantees that the company may offer
• A description of the exact services that will be performed
• Advise you that they cannot begin services until they have received your signed contract and completed a three-day waiting period. You are free to cancel the contract at any time during the waiting period.
Good credit repair companies will work with you to:
• Review and understand your credit reports
• Explain how your credit scores are compiled
• Create an action plan to help you continually increase your credit standing
While credit repair can be helpful, there is no guarantee that anything will be changed.
WHAT ACTIONS WILL A CREDIT REPAIR COMPANY TAKE?
Once the three-day waiting period is complete, the first action the company will take is to access your credit report from each of the three credit reporting agencies (Transunion, Experian, and Equifax). They will review the reports and then work with you to identify any potential errors.
If errors are identified, you will need to provide documentation to support the dispute of the inaccuracies. The credit report company will then work with the credit bureaus to determine whether this information will be removed.
While you think it would be the same, all three credit bureaus do not necessarily have the same information on you financial profile, which is why the credit repair company will review the information included in each of them.
DO I NEED A CREDIT REPAIR COMPAN TO MAKE DISPUTES ON MY BEHALF?
There is nothing that a credit repair company will do for you that you can’t do for yourself at no charge. The process, however, is time consuming, which is why people consider employing the services of a credit repair company in the first place.
Federal law provides that you can receive a copy of your credit report every 12 months from each of the three credit bureaus. You can obtain a copy of your credit reports at AnnualCreditReport.com (www.annualcreditreport.com).
Once you have a copy of your credit reports, you can review them for inaccuracies to determine your next steps.
Once you have all of the inaccuracies identified, you can file a dispute with the credit bureaus. You can either do this online at each organization’s website or through the mail. Be sure to gather and include any documentation that will support your dispute.
The credit bureaus will then have 30 days to investigate your claim and provide and explanation of their findings.
The disputed item may be deleted, updated, or remain unchanged. The results from the credit reporting agency should be provided to you in writing. If any updates are made, you should receive a free copy of your credit report, including the changes made.
If you have provided your credit information to anyone that includes the inaccurate information, you can ask the credit reporting agency to notify anyone who has received your credit information during the past six months. You can also request that they send a copy of your updated credit report to anyone that has received it during the past two year.
If your dispute is not resolved as you expect it to be, you can ask the credit bureau to add a short statement to your file which shares your side of the dispute. You can also request that this statement be provided to anyone who has received your credit report. The credit bureaus are likely to charge a fee for providing you with this service.
If after you have gone through the dispute process you feel like there are still valid errors on your report, you may file a complaint with the Consumer Financial Protection Bureau. This agency will follow up with the company in question and typically provide you with a response within 15 days.
As you can see, the credit repair process can be time consuming. If you are planning to do anything that requires the use of credit, you will want to begin this process well ahead of time to ensure that you have plenty of time to take action.
Reputable credit repair companies can be very helpful when it comes to working with the credit bureaus. Although there is no guarantee, they have a prove system to repair credit when errors have been made.
If you have any questions about credit repair companies or the credit dispute process, please feel free to contact us for more information.