What is credit repair and how does it work?

CREDIT REPAIR

This site is a guide to improving your credit so that you can become a homeowner and/or achieve other big financial dreams. Credit repair, in many cases, is a substantial part of the process for someone to be able to improve their credit enough to qualify for a mortgage.

The credit repair business does not have the best reputation. There is a fruitful supply of shady credit repair companies out there, ones that will charge you a lot of money upfront, promise you the moon and not deliver. So if you’re skeptical about the industry, we completely understand. But not every credit repair company is out to squeeze you dry. After reading this article, you’ll be able to see why working with the right credit repair company makes sense for some people. While it’s possible in a lot of cases to go it alone and clean up your own credit, some families have extra tricky credit situations and/or prefer to outsource to professionals for any number of reasons.

 

Is it worth it to hire a credit repair company?

That depends. The truth is, the results of any credit repair service are not predictable. They vary, 100% of the time. There is no credit repair company out there that has the ability to get every negative item removed from your credit report, or even get most negative items removed from your credit report, all the time. There are definitely credit repair companies out there that are very good at what they do. But you immediately turn and run from any company that tells you a fairytale-like, “We’ll get your score up to 850 in 3 weeks!” (This is likely an impossibility. Unless of course, your starting point is 848.)

 

It’s important to understand that when you work with a solid credit repair company, there is a good chance they will be able to get traction and get your scores up, but there is a chance that they won’t. That doesn’t make the credit repair company bad. That just means that unfortunately, the information on your credit report was accurate, it was valid, and it was timely. In other words, everything on that credit report was being reported correctly, so there was no cause for the bureaus to remove items that are inconvenient to your goals.

 

Even if they aren’t able to get enough negative items removed from your credit report and you don’t get the outcome you want, a good credit repair company will give you a lot of advice and teach you ways to improve your credit. In the end, that may be worth it to you if they’re being honest and not charging an arm and a leg, but otherwise, you’re likely to leave pretty unhappily.

 

Many credit repair companies charge a big fee upfront (like $800 or $1,000), and along with an additional monthly fee ($80 or $100). It’s true that having great credit will save you a boatload of money. But if you’re shelling out a big chunk of change just to find out whether or not they can actually move the dial on your FICO score, you’re basically gambling. You’re literally putting your $1,000 on the table and saying, “Let’s roll the dice and see what happens.”

 

The problem with this kind of credit repair company is that because of the way they charge, they have to make their services appear way better and more reliable than they really are. They have to give you a sales pitch so enticing that you can’t say no. Many of the companies that charge this way tout their “money-back guarantee” in order to seal the deal. These guarantees are typically filled with loopholes so that they’re extremely difficult to redeem if you don’t like your results after a few months. They know that if they told you the truth, you wouldn’t spring for it. You wouldn’t fork over $1,000 if they told you there is no guarantee.

 

If all of this seems like a terrible nightmare, rest assured. There is a different breed of credit repair company out there, the kind that does not require you to gamble with your cash. These are called performance-based credit repair companies. With this pricing model: these companies charge clients when and if they get results, not before. Period. So if you enroll in that kind of program, and a month goes by and they don’t get anything negative accounts deleted from your credit report, you don’t owe anything. This, in our opinion, is the ethical, correct way to charge in this industry– with performance-based pricing.

 

So if you’re going to use a credit repair company, we highly recommend doing your research and making sure that the one you partner with a) has happy clients, and b) charges them only when they are able to make a significant positive difference in their credit.

 

Some companies also have a 100% satisfaction money-back guarantee. So if they were able to get some traction but you’re not 100% satisfied with the results you got in their program, they will refund the money you spent on any deletions. Essentially, either you will be 100% successful in the program, or you’re not going to spend a penny.

 

We hope that knowing that if you need credit repair and can essentially eliminate your risk by going with a performance-based company, you won’t hesitate to pursue it. Just stay away from unscrupulous firms that don’t set reasonable, realistic expectations because they can’t afford to, with their outrageous pricing. You’ve got enough to worry about without another credit-related company to add to your list of bills.

 

What is credit repair and how does it actually work?

Credit repair is a professional process by which negative account information that is affecting your credit health can be changed or removed from your credit report to improve your scores. We leverage consumer protection laws to try and get negative, inaccurate, invalid, unverifiable, or outdated information deleted from your credit report. This includes collection accounts.

 

If a credit repair company knows how to properly leverage the protective measures of the Fair Debt Collection Practices Act, they can get a collection to account deleted if the collection agency cannot provide the proper detail of documentation that is legally required of them. (As a general rule, most cannot.) As of the date of this publication, the average ratio of collection account deletion in my company is 2/3. That’s a 66% success rate. If you have three collection accounts we work to get removed, and two of those times we succeed at our goal, you can bet that is going to have a huge positive impact on your credit.

 

Late payments, charge-offs, and other similar items can also be removed because of the Fair Credit Reporting Act (FCRA). There are almost always inaccuracies in the way items are being reported on your credit report, whether they are positive or negative, and you can take advantage of that fact. Under the FCRA, any inaccuracy is a violation. You can cite the law to either correct the information and improve your score, or you can use those violations as leverage to get them to remove the account from your report altogether. That bears repeating because it’s so important: if the credit bureaus are reporting inaccurately — in any way — a negative item that’s hurting your credit health and lowering your scores, you have the right to use the law that they’re violating as leverage against them to get the account removed.

 

There’s no law that mandates the credit bureaus to report everything. They can exclude some accounts or information if they want to — it’s completely up to them. The FCRA simply states that if they do decide to report something on your credit report, it has to be reported correctly. And since they often fail to do that, if you bring it to their notice, instead of doing the deep, thorough investigation required to correct it, they’ll often remove the account, which is a lot of cases is what you want in order to improve your credit scores.

 

What else is removable? Medical bills, student loans, bankruptcies, repossessions, foreclosures, judgments, tax liens, inquiries. For any negative item on your report, it’s possible to get that account removed. You have the right by law to dispute anything on your credit report that you feel may be inaccurate. Even if you think it’s probably accurate, it’s worth a shot to dispute negative items in case the credit bureaus decide they’d rather disappear the account than prove that it’s all right.

 

Before tackling the credit bureaus, our company will perform an audit of your credit report, break it down and create a customized game plan for improving your credit. Then we take action. Sound familiar?

 

That’s right. With the tools and information in this book, there’s no reason you can’t do this for yourself. Sure, you can work with a credit repair company to do the dirty work for you. But so long as you know what to look out for, taking the steps yourself can be truly life-changing and a great way to test your newfound knowledge. The main difference is that we have more practice.

 

If you were partnering with my company for credit repair, I’d make sure you understood from the get-go that while the goal is to make the biggest difference in your FICO score in the shortest amount of time, there is no guarantee the bureaus will respond to the way we’d like them to. It could take a very short period of time to make it happen for you, like two weeks, or it may take longer, like several months. Both the timeline and the exact result of your credit repair journey, are unpredictable. For that reason, I recommend that whether you are working with a credit repair company or going it alone, you start working to improve your credit 4-6 months in advance of your goal. That way, if things happen quickly, you’ll be pleasantly surprised. And if they happen more slowly, you won’t be disappointed because you planned for it.