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What is Credit Repair and How Does it Work

Credit Repair software enables consumers to correct errors and inaccurate information in their credit reports and to boost their Credit score. several companies have introduced software giving consumers a glimpse into how their behavior actually affects their credit score. Some of this self-help, consumer or professional software products guide the consumer through the complexities of credit scoring models, credit score simulation, loan qualification, and automate the process by generating letters for disputing errors and negotiating with creditors and tracking progress.

How Does Credit Repair Work

Though numerous companies claim they can clean up bad credit reports, correcting erroneous information that may appear on credit reports takes time and effort. The details cited to credit reporting agencies cannot be removed by a third party. Rather the details, if misrepresented or inaccurate, can be disputed. Credit repair companies may investigate such information, but so can the individual the report is assessing. Individuals are entitled to free credit reports every 12 months from credit reporting agencies, as well as when an adverse action is taken against them, such as being denied credit based on information in the report.

Many credit repair companies start by requesting a copy of your credit report from each of the three major consumer credit bureaus Equifax, Experian, and TransUnion. The company will review your credit reports for derogatory marks, like 

  • Charge-offs.
  • Tax Liens.
  • Bankruptcies.

Then, it will set a plan for disputing errors and negotiating with creditors to remove those items. That plan may include sending 

  • Requests to validate information.
  • Letters to dispute erroneous negative marks.
  • Cease-and-desist letters to debt collectors on your behalf.

The company may also recommend applying for new accounts to add positive information to your reports. Be cautious here. If you’ve had trouble managing credit in the past, a new account may not be the best option. Plus it’s not a great idea to take on more credit if you don’t need it. companies act is a federal law. the law ensures that credit repair service companies

  • Are prohibited from taking consumers’ money until they fully complete the services they promise.
  • Are required to provide consumers with a written contract stating all the services to be provided as well as the terms and conditions of payment. Under the law, consumers have three days to withdraw from the contract.
  • Are forbidden to ask or suggest that you mislead credit reporting companies about your credit accounts or alter your identity to change your credit history.
  • Cannot knowingly make deceptive or false claims concerning the services they are capable of offering.
  • Cannot ask you to sign anything that states that you are forfeiting your rights under the Credit Repair Organizations Act. Any waiver that you sign cannot be enforced.
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