debtopedia header

Be Careful When Dealing With Credit Repair Companies

When you're trying to manage a lot of debt, there can be times when it's just not possible to make all the payments that are due. Unfortunately, in most cases these missed or late payment will be reflected on your credit history and can affect your ability to get loans or credit in the future, even if the debt is completely repaid.

There are many companies that claim they can help you to repair your credit rating. They often say they have "special relationships" with the credit bureaus and can get them to remove negative history better than you would be able to do yourself.

Unfortunately, the credit repair industry has become a minefield of less-than-honest companies who aren't always able to do what they claim. In some cases they can even hurt your credit rating more, so you need to be careful if you are thinking of using one of these services.

There are several things that you need to keep in mind when considering credit repair services. First, your credit history is maintained by private companies called credit bureaus. They are regulated by strict laws, however and in most cases there is little that can be done to change your credit history, aside from letting time pass and building a more positive history.

Legally, bankruptcies can be reported for 10 years and other negative information can be reported for 7 years. There is really nothing that a credit repair company can do to remove these things, unless they are genuine mistakes. If that is the case, you are able to correct these things yourself anyway, just like you can negotiate with your credit card companies.

Under the Fair Credit Reporting Act, you have the right to dispute any errors or incorrect information in your credit file. When they receive a dispute, the credit reporting agency must reinvestigate the item and show its current status in the report, unless they feel it is irrelevant or frivolous. If you have a genuine dispute, this shouldn't be the case however.

If they are unable to verify the disputed item they must either delete or correct it. For example, if your report shows that you are behind in payment on a certain account but you are in fact current, they would have to correct this information.

In the worst case, if they don't resolve a dispute you are permitted to file a statement of up to 100 words that will then be included in every report they send out.

Credit repair agencies often charge a significant amount of money for these services which you can do yourself for next to nothing.

In some cases, credit repair companies have been known to send disputes to the credit bureaus, demanding that the incorrect information be removed until they can be properly investigated.

The credit bureau may do so in good faith, pending the documentation to back up the dispute. The credit repair company can then show you a report with the offending entries removed, however without the proper followup documentation those entries will be reinstated after a certain period of time. By this time, the credit repair service has been paid and you are back where you started.

The bottom line is that not all credit repair services are bad, but you need to be very careful that you choose one that will work in your best financial interests. And ultimately, do you even need a company to handle the dispute for you when you can do it yourself for little or no money?

Read the next articles about how to save money and pay off your debt quicker by consolidating credit cards.

Credit Card Debt | Site Map