Credit repair refers to the process of reviewing your credit reports from each of the three main credit bureaus to rectify any possible mistakes and discrepancies that often appear in these files.
To quote a relevant study by the United States Public Interest Research Group (US PIRG): “79 percent of all credit reports contain a mistake, error, or discrepancy of some kind.” Additionally, 25 percent of credit reports contain a major error that could result in the denial of new credit.
With such a high prevalence of errors, and one in four chances that the error could cause you to be denied a new credit line, it is important that you take the necessary steps to review your reports on a regular basis and work to correct your mistakes to maximize your credit scores and borrowing potential.
That said, you should bear in mind that repairing your credit is a time-consuming activity that will also require a high level of attention to detail. So, you will probably need to hire a third party to act as your proxy and attempt to identify and remove any negative information from your credit report. The parties that offer these services are known as credit repair companies or organizations, and their contractual, billing, and advertising activities are controlled by the Credit Repair Organizations Act (CROA).
When to consider a credit repair company
There are many ads of companies claiming that they can fix your bad credit. And while many of them are a scam, there are some that have been in the business for a while and know the rules surrounding the process. These companies know how to identify errors and navigate the rules to help raise your score, but there’s certainly no magical formula that works in every case.
That said, there are certain instances when credit repair companies can be of assistance, like:
1. When you have legitimate errors on your credit report
The primary function of any credit repair company is to remove errors from a faulty credit report.
2. When you have errors that can’t be verified
If you have a negative statement on your credit report that cannot be verified, like when the lender concerned was bought out or went out of business, then it should be removed.
3. If the lender is willing to negotiate and work with a credit repair agency
Strict lenders don’t like to work with credit repair companies, but some are willing to listen and negotiate so your score can be raised.
When it comes to fixing your credit, clients typically fall into one of three groups: those trying to build credit for the first time, those looking to maintain their current credit score, and those looking to fix bad credit. Regardless of your goal, you need a solid plan for reaching it, and finding the right company can provide you with the necessary expertise to achieve your credit goals.