4 ways to mitigate risks with credit repair companies

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It can be very stressful to have bad credit. It can impact a multitude of life events, such as the interest rate on your credit card, your ability to rent an apartment, or even your ability to buy a house. You might want to seek the assistance of a credit repair business if you’re having trouble with your credit.

While some credit repair businesses are trustworthy, others may leave clients feeling unsatisfied. This post discusses the dangers associated with using credit repair companies as well as self-defense strategies.

What are credit repair companies? 

A company that works to improve a customer’s credit rating with credit reporting agencies is known as a credit repair company. They assess both the negative information on your credit report and your credit score. Subsequently, they endeavor on your behalf to contest these entries to have them eliminated from the report.

At Experian, Rod Griffin, Senior Director of Consumer Education and Advocacy, says there’s nothing a credit repair company can do that you can’t do on your own. Once a week, you can obtain a free credit report without compromising your score. Refer to the report’s details to contest it. That being said, since they deal with creditors daily, you might still choose to work with one to feel more confident about the outcome.

According to Griffin, “Credit repair companies need to follow the Credit Repair Organizations Act.” Knowing this will help you steer clear of possibly having a negative credit repair agency experience.

3 risks with credit repair companies

When it comes to credit repair, consumers should be careful who they choose to work with. “There are a lot of fly-by-night companies,” says Joe Camberato, CEO of National Business Capital. To determine whether or not a business has a good reputation, he advises using TrustPilot and Google Reviews. “Always use a reputable company with a history of results,” he cautions people.

1. No guarantee of results 

Whether a negative mark is accurate or not, credit repair companies will contest it on your credit report. They act as your representative and submit a dispute letter to the creditor, arguing that the information is inaccurate. To strengthen your case, they will include any evidence you have that is incorrect in the dispute. If not, they assume that the creditor won’t address the disagreement. If the disagreement is not resolved within 30 days, the negative item will be removed from the report.

This implies that in the hopes that the creditor won’t reply, the credit repair business will send letter after letter. Although this was a wise strategy in the past, creditors can now request that the negative item be removed from the report. You’re ultimately still stuck with bad credit.

2. keeps you apart from the money you’ve earned 

Companies that repair credit are not cheap. This can reach thousands of dollars in certain situations. Griffin suggests that you might be better off using your money to pay off real debts to raise your credit score. It is up to you to determine whether working with a credit repair company is worthwhile and whether they can produce results.

Sometimes you might be spending your hard-earned money on something that won’t make a big difference in your credit report. Before deciding to engage with a credit reporting agency, consider this. If you don’t have the time in your hectic schedule to pursue creditors on your own, it might be worthwhile to pay a credit repair company to handle the daily grind.

3. Takes a lot of time

Credit repair companies don’t promise results right away. Every disagreement needs to go through the 30-day waiting frame. The credit repair company may file a second dispute if the creditor resolves the first one, hoping that the company won’t reply within the allotted time. It may not be possible for you to wait for the disputes to be resolved if you need to promptly repair your credit, as in the case of a home purchase. Results may not appear for several months. Your credit report will be impacted right away, and you’ll receive the results you require more quickly.

4 ways to protect yourself from credit repair risks

1. Don’t pay upfront

The Credit Repair Organizations Act prohibits credit repair businesses from collecting money upfront. They have to hold off until they finish the task. Therefore, be aware that a credit repair company that demands payment before starting work is not a respectable business operating legally. Avoid these businesses and carry on your hunt for a respectable business that complies with the Credit Repair Organizations Act’s guidelines.

2. Get a contract 

A contract for the services rendered by credit repair organizations must be given to you. The responsibilities and fees for the agency’s services should be specified in this contract. It ought to cover the period that you have to back out of the agreement and declare it void. Observe that Griffin states that the contract “cannot promise to withdraw accurate information.” All it can do is pledge to try and get rid of anything negative from the report. Results cannot be guaranteed by it.

3. Never consent to information falsification

A company that repairs bad credit might ask you to fabricate your identity or other personal details to remove negative information from your credit report. That’s against the law. A credit repair company’s options for removing an item from your report, if the information is true, are limited to disputing the item several times in an attempt to force the creditor to miss a deadline. Seldom does this result in the customer receiving what they wanted from the credit repair company.

4. Make sure you can back out within three days. 

You must be given three days by the credit repair company to back out of the agreement. You should investigate the reputation thoroughly during this time and determine what steps the credit repair company wants you to take to address negative items. Terminate the agreement if something doesn’t seem right to avoid paying any fees. The Credit Repair Organizations Act provides for a three-day withdrawal period. You can request a longer period from a company, but not a shorter one.

Conclusion

If your credit report contains true errors and you have the patience to wait for disputes to be resolved, credit repair companies might be a good fit for you. Any credit repair agency you deal with must adhere to the guidelines established by the Credit Repair Organizations Act to safeguard your financial interests and legal rights. Remember that you can perform all of the tasks performed by the credit repair company on your own, for free. Before initiating any process, obtain a complimentary copy of your credit report to ensure that you are fully aware of the issues involved in credit repair.

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