The Warning Signs of a Credit Fixing Company
A credit fixing company promises to clean up your credit report by contacting the credit bureaus and disputing inaccurate information on your behalf. They can also help you negotiate with creditors to have negative items removed from your credit report, though they can’t do anything that you can’t do yourself for free. The good news is that, with some research and effort, you can save a bundle and get your credit back on track without paying a credit repair company.
A legitimate credit repair company will review your credit reports from the three major credit bureaus (Experian, Equifax and TransUnion) to look for errors that can be disputed. These include account information that shouldn’t be there, such as a bankruptcy you didn’t file or a debt you don’t owe, and inaccurate personal data, such as misspellings that mix up your name with someone else’s. They may also check your credit score to make sure it’s accurate.
If the credit report has errors, the company will send a letter to the credit bureaus, the information furnisher (like your bank or credit card issuer) and your creditor, asking that the inaccurate information be corrected or deleted from your report. Credit bureaus are legally required to investigate and delete any inaccurate items within 30 days of receiving a dispute.
Some credit repair companies offer additional services, such as providing a list of your most damaging accounts and explaining how to handle them yourself in order to avoid future problems. Others give you access to your credit reports and scores on a monthly basis so that you can monitor changes.
Unfortunately, there are many credit repair scams. Some of them may damage your credit even more or dig you into a deeper financial hole, while others are simply ineffective. It’s important to be aware of the warning signs, which can include:
The first sign of a potential credit repair scam is one that demands upfront fees. Credit repair companies should not require payment until they’ve completed their work, according to the Fair Credit Reporting Act. They should also never advise you not to contact the credit bureaus directly or encourage you to misrepresent your information by creating a new “credit identity,” which is illegal.
Lastly, the credit fixing company should explain exactly what they can do to fix your credit and how long it will take them. A reputable company will be honest about the amount of time and effort it will take to correct mistakes and how those mistakes might affect your score. If they’re unable to provide this information, they are probably a bad choice. Also, be cautious if the company makes claims that are unsubstantiated or don’t answer your questions thoroughly. You’re better off with a different company. It’s a good idea to seek out a credit counselor before hiring a credit repair company. A counselor can help you understand your credit history and teach you how to improve it on your own in the future.