Credit Repair Companies - What They Can and Can't Do
According to the Federal Trade Commission, around 20% of Americans have unfair credit scores due to reporting errors. Repair is a flourishing industry, and the services are accessible across the country. These providers can give your score a boost by disputing data compiled by nationwide bureaus. Some consumers misunderstand the purpose of repair. What can you expect from these companies, and when are they powerless?
How Does Repair Work?
Under the Fair Credit Reporting Act, all bureaus in the United States are obliged to provide only verifiable information. This gives consumers the right to dispute inconsistencies and false data. The dispute process is standardized: you collect evidence and initiate a formal procedure that takes between 30 and 45 days. Check the Credit Pros review to learn more. Based on the results of its investigation, the agency may accept or reject the changes.
Every citizen may initiate the disputes on their own at any time. Even the starting credit may be wrong! Whatever the errors, disputes are free. On the downside, the process is lengthy and has subtleties.
You should navigate consumer credit laws and the rules of written communication. Collecting sufficient evidence is challenging if you are not sure what documents are required. Unsurprisingly, many consumers opt for delegated repair to save time and effort.
What the Companies Can Do
The experts may challenge any entries that seem wrong or unverifiable. First, every negative event has a fixed lifespan — most derogatories must expire in seven years. Secondly, they must be substantiated and verifiable. Any data that may not be proven must be deleted under the Fair Credit Reporting Act.
Consumers spot various types of inaccuracies in their histories. For example, you may notice accounts that do not belong to you. The amounts may be wrong, or you may see events that never happened. False derogatories include events like:
- late or missed payments,
- collections, etc.
Consumers should check their reports regularly to deal with any issues. Do not wait for derogatories to accumulate. The more errors there are — the longer the fixing process and the more you will pay in the long run. The analysis may also reveal that you have been a victim of identity theft!
Only the bureaus may change the contents of your reports. They require evidence — you may not demand deletion without proof. Repair pros are adept at collecting convincing evidence. They communicate with lenders formally to obtain the documents. For example, debt validation letters ask the institutions to prove that you owe the amount they reported.
Thus, repair firms conduct the entire fixing process on your behalf. From preliminary analysis to initiation of disputes, the qualified staff handles everything. These services only work in case of verifiable errors. If your records are in order, there is nothing to fix.
Credit repair firms hire experts with extensive knowledge in the financial industry. Aside from fixing your reports, they may provide guidance for accelerated rebuilding. This is the only avenue for those whose scores are correct. To achieve the best results, you could work on both fronts, fixing and rebuilding the history simultaneously. Learn more about the latter below.
What the Companies Cannot Do
Even the best experts in America may not remove legit information. There is no way to get rid of verifiable derogatories, however damaging they are. If your low rating stems from irresponsible borrowing behavior, it is time to change your habits and take charge of your finances.
Improving a poor history may take years, as opposed to several months of repair. Consumers should be careful with borrowing to avoid mistakes that will tarnish their scores for years. For example, missed or late payments influence over a third of the score!
Your total is based on a fixed combination of factors, each with a specific weight. The two most common systems in the United States — FICO and VantageScore — rely on similar aspects to calculate creditworthiness. In FICO, these are:
- history of payments
- overall size of the debt
- age of history
- new accounts
- credit mix
By working with different components of the assessment, you get a rise. For example, Experian Boost allows you to add phone bills, utility payments and streaming video subscriptions to the report. This adds 12 points on average
While there is no way to delete the payments you missed or delayed, you may work with the total amount owed, which includes credit utilization. The latter is the proportion between the balances and limits on your credit cards collectively.
Optimize Credit Card Use
The less of your available credit is charged the better for your score. For instance, a holder of three credit cards with a total limit of $5,000 has 50% utilization if they spend $2,500 across the accounts. Meanwhile, according to some experts, the target is 10%. This requires a balance of just $500.
Naturally, only some consumers can reduce their balances substantially at once. Fortunately, you may approach the equation from the opposite side — available credit. Request an extension of the limit or get a new card from another issuer. In our example, the consumer should work on both fronts, as getting $20,000 of extra credit does not seem plausible.
Finally, you may become an authorized user on someone else's account. If you have a friend or a relative with an excellent credit history, ask them for a favor. Authorized users boost their credit utilization instantly, as the other person's limit is included in the proportion.
Credit repair companies may delete unverifiable information that skews your credit score. They operate under the Fair Credit Reporting Act. Choose your provider thoroughly, paying attention to its BBB page, customer feedback, reputation, and pricing. Make sure the service package meets your needs and does not include useless add-ons.