If a company asks you to pay in advance for a service, you should treat it like a scam. The federal Credit Repair Organizations Act states that businesses cannot request or receive payments until they have completed the services they have provided. No one can remove negative credit information from your credit report. Anything a credit repair company can legally do, you can do it yourself at little or no cost.
Only time and a plan to repay the debt will fix your credit. You can improve your credit by demonstrating over time that you can pay your debts on time. There's nothing a credit repair service can legally do for you, including eliminating incorrect information that you can't do on your own for little or no expense. If you find errors in your credit report, contact the credit bureaus and the company that provided the information so that they can eliminate the errors in your report.
It's illegal for credit repair companies to lie about what they can do for you or to charge you before helping you. 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. 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. Your credit report contains information about whether you pay your bills on time, what loans and credit cards you have (and the amounts you owe) and if you have filed for bankruptcy.
Both the credit agency and the company that provided information about you to a credit agency are responsible for correcting inaccurate or incomplete information in your report. Send the letter to your creditor and to the credit bureaus, as some creditors don't report information to the credit bureaus. However, there are steps you can take to start building a more positive credit history and improve your credit scores over time. It takes time, but you can improve your credit by paying your bills before the due date, paying off debts, especially your credit card debts, and not taking on new debts.
If you've had credit problems in the past, how long it will take to recover depends in part on the severity of the negative information in your credit report and how long ago it occurred. Business credit agencies often send you warning notifications when a derogatory mark is going to be added to your credit report. If a company promises to create a new credit identity or hide its bad credit history or bankruptcy, it's also a scam. Not only can closing it hurt ratings by eliminating available credit and increasing the credit utilization rate, but keeping canceled accounts open can also be an advantage, since they are old and in good condition (liquidated) accounts.
If you make payments or reduce your credit card balances, don't worry if your credit report isn't updated right away. The CROA is a federal law that aims to protect consumers against scams by establishing guidelines for what credit repair services can and cannot do.