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Having a good credit rating is important, in fact, for many of us, it is a goal we want to keep achieving and this is often because without it, you may be denied low interest loans, a job, a rental, and even a competitive insurance premium.
If your credit report shows a history of debt problems or contains errors, you may consider using a repair service to straighten things up. However, before doing that, it’s good to know how these businesses operate.
What is Credit Repair?
Credit repair is the process of fixing poor credit ratings that may have arisen due to a variety of reasons.
A third party, often referred to as a credit repair company or a credit services organization, attempts to get information removed from your credit reports in exchange for a payment.
Notably, errors are common in credit reports but by law, the information reported by all credit bureaus is expected to be unbiased, accurate, relevant, and verifiable.
Repairing credit anomalies may be as simple as disputing mistaken information with the credit agencies. Another form of credit repair is to deal with financial issues such as budgeting and identity theft that may have caused major damage that leads to poor credit ratings.
It is also important to note that correcting the erroneous information that appears in your reports takes time and effort. Details cited to credit reporting agencies cannot be removed by a third party, but if the details are inaccurate, then they can be disputed.
Whereas credit repair companies may offer to investigate this information, so can you. Individuals are entitled to free credit reports every 12 months from credit reporting agencies and with such information you can individually act against it or commence your own investigation.
Legality of Credit Repair Services
Credit repair services are bound by Credit Repair Organizations Act. Simply put, legitimate credit repair service is protected by federal law.
The Fair Credit Reporting Act also requires that credit bureaus provide fair and accurate information about your credit history. These two main laws guarantee consumers the right to correct or dispute errors in their credit reports.
States also craft laws to regulate credit repair firms operating within local jurisdiction. These laws work in tandem with federal laws that guide credit repair services aimed at consumers.
Credit Repair Scams
Like many industries in the financial sector, the credit repair industry is also affected by cases of scams, fraud, and identity theft.
Typically, a debt relief service scams target consumers who have significant credit card debts by falsely promising to negotiate with their creditors.
Fraudsters also target financially distressed consumers, who are having poor credit scores, by luring them to subscribe to their services by falsely promising that they can remove the negative information from consumers’ reports, even if the information with the credit bureaus is indeed accurate.
The Consumer Credit Protection Act prohibits untrue or misleading representations and bars companies offering credit repair services from demanding advance payments.
Additionally, the act requires that contracts between the consumer and the repair companies be in writing and gives consumers contract cancellation rights.
Alternatives to Credit Repair Services
You can individually repair the erroneous information that may appear on your credit reports. If the information is inaccurate, you simply need to contact the credit bureau on your own and dispute what you feel is inaccurate.
For negative but accurate information, you have several options:
- Drop the debt naturally if it’s nearing the time for it to be removed. Most negative information does not appear after seven years from the date of last activity.
- Use your credit in a responsible manner. Pay off your purchases on the same day and do multiple payments in short periods not exceeding a month. In short, build a culture of repaying money as soon as you borrow it.
- Use less of your available credit. This helps keep your credit utilization low; below 30% is the recommended figure by experts.
In Conclusion
Credit is part of your financial power. It helps you get the things you need now like loans, insurance premiums, or even a good job. All this is impacted by what’s on your credit reports.
It’s therefore obvious that building and maintaining a good credit keeps your opportunities open. But however, tempting it may be to pay someone to undo the bad rating, you are your own best resource.
