Credit Repair Companies: Do They Work?

Debt and credit go hand in hand. In most cases where you find it challenging to handle your debt, you’ll also find out that your credit has been severely affected as well.

Repairing your credit, then, would be a more sensible move especially if it reaches to a point that you are no longer able to apply for new credit. There are companies out there that provide services to help you fix your credit. However, do you really need them?

What is Credit Repair?

Credit repair refers to any act that one might take in order to fix errors in their credit report whilst also settling your debt. You have to understand that credit reports is far from being correct. This is despite their ability to influence a creditor in deciding whether or not to approve your application.

It’s prepared by humans with the aid of computer programs and algorithms. And we all know how far from infallible those three things are.

However, credit repair goes beyond disputing errors in your credit report. What you’ll have to understand is that certain “miscommunications” might arise when you try to settle your debts.

One strategy that you used might not have been properly communicated to the credit reporting agency. This could still result in well-meaning yet still erroneous entries on your credit report.

Fixing Errors

There are some potential errors that could arise from your attempt to settle your debt which will be reflected on your credit report. This will include:

  • Payment entries which were marked as missed since you opted to consolidate all your debts into one account
  • Incorrect statuses for accounts such as being marked as settled in full when it should be paid in full
  • Collection accounts which remain active when you already had them deleted when negotiating for your debts
  • Penalties and derogatory remarks that remain on your account when they should be taken off after 7 years
  • Accounts whose ages were not re-set which is one of the options you have when settling your debts with certain creditors

Of course, credit repair can also take a look in the more formal errors done on your report such as the wrong name, address, and account numbers. The point is that credit repair services will look into any error that can potentially change your score. This may also help you streamline your debt management process should they be corrected.

When it Actually Works

However, like a lot of other financial services, credit repair is effective only in a number of specific instances. In fact, there are conditions that you must meet in order to avail of credit repair.

1. The Errors are Legitimate

By legitimate, that means the negative entries in your credit report are actually mistakes done by the one reporting your activities to the agency or the agency themselves. With that said, credit repair does not remove actual negative entries in your report.

2. The Data on Your Credit Report Cannot Be Verified

There’s a little known fact that many do not know about their credit reports and it’s that every data that the agency gets about you has to be verifiable in order to be included. This is in the interest of fairness especially when a dispute arises.

So, for example, if you’ve got a derogatory remark from a lender who went bankrupt a few weeks later after giving their report to the agency. A diligent agency would call that lender first to verify the information. However, since they are out of business, that agent would get no answer on the other end of the line.

As such, that reporting agency is compelled to remove that entry in your credit report regardless if it is true or not. It’s an exploitable loophole but it’s still effective in raising your score and removing an item from your report.

3. If the Lender Actually Cooperates

Credit repair services have been in the industry for quite a while so your company of choice should have the means to negotiate with creditors on your behalf. Does this always work? No.

Some creditors are just that hard to negotiate with especially if the amount you owe them is quite big. Some also have negative experience with services before or are just that stubborn to accept a compromise. This is even if the offer comes from a trusted credit repair service.

However, if your lender does give in and cooperate, credit repair services can help you raise your score considerably. In addition, that means you can re-negotiate the terms of your debt with that lender which should make things easier on your part.

What are the Effects?

First of all, you must understand that there are no guarantees that your credit score will be raised. The credit repair process is designed to fix errors in your credit report primarily.

Any positive effect you might have will be based on the fact that you don’t have to deal with an erroneous credit report. Also, if there is nothing to correct, then the credit repair process can’t do much for you.

That being said, there is still the chance that your credit score will rise by a few points. The increase will be determined by a number of factors such as:

1. Your Original Score

Your initial score will determine if that change is either a huge leap forward or a mere skip. If you’ve started with a low score, the increase should be considerable. However, if your initial score was already high, the changes should be in between 10 to 100 points.

2. Negative Entries

The rule of thumb is that more incorrect entries tend to lead to hugely improved scores. After all, this leads to multiple corrections.

Aside from that, the age of the incorrect entry would determine the extent of changes in your score. The older that entry was, the changes will be smaller.

This can be explained by the fact that some credit reporting agencies would also factor in your diligence in monitoring your reports when making the changes. The quicker you can act on errors on your report, the better.

The Repair Process

The way credit repair is done depends greatly on a number of things. This will include:

1. Your Budget

Services to repair your credit tend to have considerable fees. You need to determine whether or not you have the means now to pay for what credit repair companies can offer.

2. Your Ability to Dispute Errors on Your Own

Here’s something that many don’t know about credit repair: you can actually do it yourself. Most of the services that a credit repair company can offer are things that you already have the means to do on your own.

However, there is the fact that you don’t know how to confront creditors and the reporting agencies regarding the errors. You might not even believe that you can sufficiently support your claim in the right channels. If you think that you can’t successfully dispute an erroneous report on your own, then you might need help.

3. The Volume of Negative Items

Generally, more mistakes on the credit report will lead to massive changes on your score. However, the process of disputing the report becomes more tedious if you raise more than a handful of mistakes. Naturally, the agency would want proof that there was a mistake. These factual errors should also be neatly compiled and prepared for cross-referencing purposes.

If you have a few mistakes that need correcting, then doing the repair process on your own would be recommended. If the mistakes could potentially change your score by several hundred points, then help would be necessary.

How Credit Repair is Done

Regardless if you pay for services or do the repair on your own, the process will largely remain the same.

  1. You Obtain your credit report from the three credit reporting bureaus
  2. Review each report and look for any mistake or error
  3. Notify the agency that issued the report about the mistakes
  4. Wait for 30 days for the agency to examine your claims and verify the entry. This is where they will contact your lenders and other creditors as well as access your other public documents to see for any discrepancy in their report.
  5. The agency will then proceed to remove items that were erroneous if proven true. If not, they will issue a response stating which entries are true if not all.
  6. Once the corrections have been completed, your score will be adjusted and a new credit report will be issued on your behalf.

How Do Credit Repair Companies Work

As was stated, there is nothing stopping you from repairing your credit yourself. In fact, the credit laws that the UK have imposed allow you to properly dispute your credit reports under the proper forums. If you do it right, you can get the corrections you were looking for and your credit score would improve.

Here is the problem, however: People are rarely that keen in spotting mistakes in their credit report. You might not even know what to look for with all of that information.

Furthermore, the process of disputing your claims can be very tedious. Not only do you have to file your claim at the agency that made the report, you also have to wait for the mandatory 30-day period for a response. You’d rather use that period to focus on something more productive, not constantly worry over the state of your paperwork.

How Credit Repair Companies Work

This is where a credit repair company comes into play and they are designed to help you go through the credit repair process without doing the dirty work yourself. For a fee, the credit repair company will:

A. Request your credit report from any of the three agencies.
B. Identify different errors and mistakes that that credit report might have.
C. Reach out to the credit reporting agency and prepare all the documents for you. Once corrections have been made, they will send you a free copy of your now corrected credit report.
D. Contact lenders with whom you have outstanding balances with and work out a deal. This will make it easier for you settle your debt or have negative remarks on your account removed.
E. Provide you with assistance in coming up with a plan to improve your credit score through making changes in your financial habits.

What Can’t Credit Repair Do?

Credit repair is specifically designed to address a number of problems when it comes to your credit report. As such, there are things which it cannot do and these will include:

1. Establish Credit History

Credit repair services are there to fix entries in your credit history. If you have yet to receive your first credit report, then there’s nothing to repair yet.

2. Directly Remove Legitimate Negative Remarks

Credit repair was basically designed to dispute and correct errors in your credit report. It is not there to magically erase the most troubling remarks made on you by lenders. This is especially if the reporting agency verifies them to be true.

Your only option here is to work out a deal with that lender so they will withdraw that negative entry in your history. And for that, you will need a lot of tact and diplomacy. Better yet, the services of someone who possesses both so you can work out a deal with your lenders.

3. Improve an Already Good Score

It’s true that credit repairs are offered to help you remove mistakes on your credit report. However, those corrections might be unnecessary if you already have a good score.

Some lenders would even choose to disregard minor derogatory remarks made on you so as long as your credit score is within the good to excellent range. That being said, however, it won’t hurt to have these minor errors removed so they won’t potentially harm your credit score in the future.

How to Tell if a Credit Repair Company is Not Worth My Time?

Trust is a major issue especially in companies that deal with credit and finances. You’d rather not pay for something that is not going to give you the results you want. You might even have some concerns that that agency will blatantly rob you of your hard-earned wages. When looking for a credit repair company, it’s better to consider a few things first.

1. Be Mindful of Spam Offers

If you are having problems with your credit score and suddenly receive an offer from a company over an e-mail, it’s best to not take the bait.

First off, no self-respecting credit repair company would ever do that. They’d rather let you find out of their services yourself and initiate the contact. Second, spamming is a telltale sign that the company has a dubious record or, worse, a front for scammers.

2. Beware of Full Payments

No credit repair service is allowed to charge customers with an upfront fee. In fact, they’d only ask for your payment the moment that you have received the adjustments to your score.

A company that requires you to pay for their services in full when nothing has been delivered should be considered a major red flag. It should tell you that you might be dealing with a group that is going to take advantage of your trust no matter what.

3. No New Identities Required

This is a no-brainer but you’d be surprised how many people still fall for this trick. What you have to keep in mind that you are never allowed by law to create a new identity just for your credit accounts. If you are discovered using a false identity, the charges you’ll rack up under UK laws will involve more than mere fraud.

As such, if a company’s credit repair strategy involves you creating a second identity to clear your debts and remove errors in your credit report, do yourself a favor and never contact them again. The liabilities you’ll incur from doing business with these people are not worth the hassle just to fix your credit score.

In a Nutshell

So do credit repair companies really work? The short answer is yes. However, whether or not you really need them is up to you. If you have the means to dispute your reports and are quite confident in securing corrections for them, there’s no harm in going for the independent route.

But if you are quite unsure as to how the credit repair process works or have no time for it, you are better off seeking professional help. Sure, you’ll be paying for their work but the chances that you’ll get a favorable result from your dispute are high.

Have you tried fixing your credit reports by yourself in the past? Would you rather hire a credit repair company to do it for you next time or would you still insist on the free route? Let us know in the comments section down below.