Credit repair refers to corrections in the credit report. If there is any error in your credit report, these errors are reported to the credit bureaus for corrective actions.
There are the specialized companies that provide services to repair the credit against certain payments. These companies communicate with the financial institutions and credit bureau and help ensure errors/misstatements in your credit report are removed. So, these reports can present the true/actual condition of your credit credibility.
Further, it’s important to note that the services of these companies are legitimate in the United States. These companies operate under the credit repair organizations act. This act defines the services that can be provided by these companies and the services these companies are prohibited to provide. Let’s discuss the services that these companies can provide and prohibited.
|The services these credit repair companies can provide||The services these credit repair companies can -not provide|
|These companies can communicate with financial institutions and credit bureaus on behalf of the client.||Making a false claim to remove the negative items on the credit statement. In other words, deceiving the credit bureaus by providing false information.|
|The companies are not allowed to charge excessive amount by law.||Charging customers for the services that have not been provided to them.|
|Credit repair companies need to market their services in a clear and transparent manner. They are not allowed to make extraordinary claims.||Making a 100% claim that negative information will be removed from credit report.|
|Credit repair companies need to disclose action plans on how they are going to help their client in the execution of the repair process.||Making some false claim about the identification of a credit customer or making some scheme by hiding/changing the identity of the customer. In other words, doing any unfair means that restrict the bureaus from getting customer-related information.|
Credit repair process
The credit repair process is simple and straight. However, you need to be consistent and committed to the process. Even, you can repair credit yourself. However, it’s a good idea to hire a credit repair company. Let’s discuss the process how the credit repair process can be executed.
1-Get your credit report from all three credit bureaus
This is the first step to start the process for credit repair. At this stage, you’ll need to collect credit reports from all three credit bureaus if you are in the United States. You might have to pay a certain fee to get the reports from all three credit bureaus. Further, it’s important to note that requesting a credit report does not have a negative impact on your credit score, that’s because it’s not an inquiry for the credit but a request to provide the credit report. So, once you’ve all three reports from credit bureaus. The next step would be to,
2-Review all the credit reports
The second step is to read the report thoroughly. It might have one or more of the followings.
- Default – is there any default on your credit report that you never made? The defaults actually hit your credit score significantly. So, if there is any default, note it down.
- Credit application – Have a look if there is any loan/credit application that you did not make. If there is any, note it down.
- Credit infringement – Have a look if there is any overdue balance that appears as outstanding and shows as infringement (like you cannot be traced). If there is anything like this, it can actually have an adverse impact on your credit score.
- Debt agreement – Reports might show some debt agreement that you never entered. So, if there is anything like this, note is down.
It’s important to note that your single loan might be reported twice in the report. So, it really needs to be noted. So, if you find any of these problems in the credit report like this, make a list of all these problems before moving to the next step.
3-File the dispute to the credit bureau
Start filing disputes in line with the list. For instance, if you see there is some wrong information on a credit statement issued by Experian, file the dispute and they will have 30 days to investigate the claim at their end. If bureaus conclude that the entries are not factual or these may be a result of the error, these entries will be removed from your report. As soon as, the entries are removed, the credit score moves up.
Here, it’s equally important to note that the bureau might conclude that the dispute is not strong enough and they might choose not to investigate the issue.
4-Make some serious efforts to enhance your credit score
It refers to building your financial history and proving your seriousness/financial behavior. So, to build history, start using a credit card. However, there is a need to make sure that payment for the credit card is made on time. Otherwise, it will lead to a negative impact on the credit report and credit score. For instance, if you do not make a timely payment, the credit card company can report this behavior to the credit bureaus and it will ultimately lead to a decrease in your credit score.
Also read, personal finance management.
Credit repair is the process of removing false and adverse entries from your credit report. Most of the time, people hire credit repair companies to execute an overall process for credit repair. These companies work under the credit repair act and need to follow the guideline provided by the law.
As per law, these companies can coordinate with the credit bureaus and file dispute on behalf of their client. However, these companies are restricted from making 100% claims regarding the removal of negative items from a credit report.
It’s not necessary to appoint a credit repair company to execute the process. This work can even be done by you. However, these companies have a strong understanding of the process and links with the credit bureaus. So, it’s advisable to repair the credit by hiring them.
The process of credit repair is simple. You just need to get your credit reports from all three credit bureaus, review the report to see if there is any wrong information and if there is some wrong information, and file the dispute, the bureaus have 30 days to investigate the issue, and if your claim is based on fact, the negative entry is removed from your credit report.