Conclusion Legitimate credit repair companies can ensure that inaccurate information is removed from your credit reports so that it doesn't harm your credit rating. However, they can't do anything for you that you can't do for yourself if you're willing to put in the time and effort. Unfortunately, none of those promises are true. Credit repair companies offer to “fix” your credit by removing negative items from your credit report.
They offer to file disputes about negative items on your behalf with the credit bureaus and have them eliminated. What is the problem with this approach? The entire strategy is based on taking advantage of a loophole in the credit system. When precise items are removed, it's only temporary, at best, for a few months. Another practice that these types of companies can use is file segregation.
This is where the credit repair service asks you to request an employer identification number (EIN) from the Internal Revenue Service, which has the same number of digits as a Social Security number. Once you have the EIN, you'll be prompted to apply for new credit with it, so you can create a completely new credit history. Not only is this practice illegal, but it's rarely effective. When you start over, you'll have a blank credit history, which lenders often perceive as negative or suspicious.
What might seem like a simple, positive solution to your credit situation is actually a series of false promises that are likely to damage your credit. If you make payments or reduce your credit card balances, don't worry if your credit report isn't updated right away. If the credit reporting agency believes that your dispute is valid, the information will be removed from your credit report and your score will reflect that change as soon as it is recalculated. Credit repair companies make sure that you know when these items are being removed, but they don't tell you when they will reappear.
Credit repair companies typically charge a monthly fee for work done in the previous month or a fixed fee for each item they remove from their reports. With a positive title like “credit repair,” it's no wonder that people fall victim to the fraudulent practices of credit repair companies. If the credit counselor negotiates settled amounts that mean you pay less to your creditors than you originally owed, your credit rating could be affected. If your credit report shows a history of debt problems or contains errors, you may consider using a repair service to “fix” it.
Opening multiple credit accounts in a short period of time can make lenders appear risky and, in turn, have a negative impact on your credit scores. The CROA adds transparency and due diligence to the credit repair process, reducing the likelihood that consumers will be taken advantage of. You can learn more about how to select the right accredited credit counselor for you at the National Foundation for Credit Counseling. Monitoring your credit will help you detect any potential problems that could cause your credit score to drop again.
The first is that if the information that the credit repair service challenges is actually correct, they will report it again the next time they send data to the agencies. When that happens, the credit repair company takes action, calling the consumer to announce that the item has been recalled and suggesting that they pay more each month to “keep up the momentum and go for the rest.”.