A low credit score can be an extremely detrimental situation for a person. Someone whose credit has fallen into disrepair is unable to get approved for loans, credit cards, car loans, mortgages, and sometimes even jobs. Even if you are able to get approved with a lower credit score, interest rates will be much higher.
This results in you paying more money than someone else over the course of the time you make payments. Having a low credit score can happen as a result of a mistake, or it can occur as a result of something entirely out of your control that puts your finances under pressure. In either case, it’s not fair for you to suffer for 7-10 years until these items are removed. Instead, credit restoration can be used to get you moving in the right direction.
Let’s find out how this process works, and how to find the right company to help you with your credit repair.
The 3-Step Process to Credit Restoration
Credit restoration is something that everyone has access to. It’s a right given to you by several different laws that affect consumers and regulate credit card companies, lenders, and the credit bureaus.
While it’s most certainly possible to DIY your credit repair, the benefits of using a credit restoration service are numerous. Here are a few examples of how they can better serve your needs:
- They have teams of paralegals and lawyers that are experienced and knowledgeable in the credit industry
- Credit repair companies are able to pinpoint possible disputes on your report far more effectively and send out disputes faster than a single person
- In some cases, the credit fixer you choose can also negotiate with creditors and leverage avenues you may not know of
- Finally, credit repair services know exactly which documents or paperwork you need to make the strongest case for having an item removed.
When you’ve come to this point, and you’re asking yourself “what is credit repair, and how can it help me?” you’ll start to come across companies that offer this service. Most commonly, the process they use will follow these steps:
1. Obtain and Analyze Your Credit Reports
The first step any reputable credit repair service will take, involves getting your credit reports from the three credit bureaus. These include Experian, Equifax, and TransUnion. Each of these bureaus are responsible for generating credit reports based on information they obtain about your finances.
They go to your banks, credit card issuers, auto financing companies, and even public records. They will also use data furnishers that collect this information about you as well.
Since each of them use different methods of gaining this information, they commonly have differing reports. Finding the discrepancies between these three documents is just one way of pinpointing potential dispute opportunities.
Since these reports are used to weigh your chances of being approved, and in generating your credit score, it’s hugely important that they are 100% accurate, and in many cases they are not. If you are tying to DIY your credit repair, you can obtain these reports for free once per year at annualcreditreport.com.
When you first sign up with a credit repair service, they will either gather these reports for you, or ask you to provide them. Once they have them, they go to work. Experienced paralegals and lawyers will go through your reports line-by-line and look for anything that doesn’t meet the following criteria:
- Fair
- Substantiated
- 100% accurate
Anything that isn’t in line with these requirements can be disputed and possibly removed. It’s worth remembering, however, that accurate information, no matter how negative it is, cannot be removed legally. Credit restoration works by fixing errors that are within legal control, and in doing so, raises your credit score.
2. Gather Evidence and File Disputes
Once the company of your choosing has finished analyzing your reports, the next step is to start organizing disputes. Thanks to a law called The Fair Credit Reporting Act, also known as the FCRA, you have the right as a consumer to dispute any items on your credit report that you feel aren’t accurate.
This law also dictates how credit bureaus are allowed to gather information, and requires them to provide you with your free annual report. When you report an error to them, they are required to investigate it at no cost to you and respond within 30-days.
If they find that the item may not be accurate, they are required to remove it. At a later time, if it turns out the items were accurate, they can be placed on your report again, but the bureau must let you know 5-days before they put something back on your report.
This same law also requires negative items to stay on your report for 7 years. In the case of bankruptcies, these are 10 years. As a result of these laws, the creditors or bureaus in question could potentially face legal fines and fees if they don’t comply properly.
You are entitled to damages up to $2500 and even punitive damages plus legal fees if you are forced to sue them. If you decide to take legal action, it must be done within 5 years of the incident.
Knowing this information about the law, credit repair companies file disputes with the bureaus and sometimes creditors as well on your behalf. They will include any evidence, paperwork, or documents that support the disputes and send them off each month.
Once this is done, they wait for the results.
3. Examine Results and Repeat as Needed
After the 30-days have passed, you will receive some sort of correspondence from the bureaus. They will either inform you that the item has been removed as a result of their investigation, or they will claim it is accurate.
In the second scenario, a credit restoration service will file another dispute, but this time they will try a different angle or different evidence if you still believe it is inaccurate. This process will repeat until all the potential items have been removed from your report.
This is usually the part where you’ll be asking yourself “how long does credit repair take?” The answer to this question is different for everyone. In some cases, the items that need to be removed will be simple affairs, and credit repair will only take a few months.
In other cases, it can take longer. The average times range from 4-6 months in total. Credit repair services don’t utilize contracts for this reason. You are able to cancel at any time during this process, because some people need it longer than others.
How to Avoid Credit Repair Scams
Since credit is such an important part of people’s lives, when it becomes a problem, they in turn become desperate for a solution. Scammers know this, and will prey on innocent people who buy into their lofty promises of a clean credit report, and having all their negative items washed away.
This is an easy way to lose a lot of money, or get yourself in legal trouble. Let’s take a look at some of the warning signs of a credit scam, and how you can avoid having this happen to yourself.
1. They Want Payment Up Front
Our first warning sign actually breaks one of the credit laws in place. If a credit restoration service that you’re considering asks you to pay up front for services that haven’t been performed, run the other direction.
In cases like this, they will ask for hundreds, or even thousands of dollars in advance. Once they have it, they’ll disappear and never do what they promised they would for your credit. They know people are desperate for a fix, so in many cases, they fall into the trap.
The Credit Repair Organizations Act forbids any company from taking payment before services have been performed. That’s why legitimate credit repair companies will only take money on a monthly basis, after they’ve performed the process outlined above.
2. They Don’t Inform You of Your Rights
As we discussed earlier, you have a legal right to your credit reports and to credit repair as a whole. As part of the Credit Repair Organizations Act, businesses are also required to give you a written statement called “Consumer Credit File Rights Under State and Federal Law” before you sign any contract or agreement.
A reputable credit restoration service will start by showing you this document and explaining your rights as a consumer.
3. They Will Tell You to Create a “new” Credit File
This is one of the tactics used by credit scammers known as file segregation. Using this tactic, they tell you that you can start from scratch and create a new file. The way this tactic works, is by providing the consumer with an employer identification number or a fake social security number to trick the bureaus into making a new report.
It’s fraud in the purest sense of the word, and it carries a hefty sentence for those who are caught participating in these illegal activities, even if you didn’t know you were doing anything wrong.
4. They Promise to Delete Accurate Information
As we discussed earlier, you cannot remove something from your report if it’s indeed accurate. Only negative items that have something wrong with how they are reported, can be removed. Illegitimate companies will promise to delete everything negative, and this is not going to work as a long-term solution.
In these scenarios, they tend to use a tactic called “jamming” where they try to overwhelm the bureaus with so many disputes that they cannot process all of them in time to meet the 30-day deadline. To avoid any legal matters, the bureau will sometimes remove the item, just to save them the trouble.
This temporarily fixes the issue, but when they come around again to generate your report, items removed through jamming will be spotted and reapplied to your report. It’s not a long-term fix.
Final Thoughts
Your credit is one of the most important aspects of your financial health. It’s absolutely possible to achieve a higher credit score through this credit restoration process, but you should always be on the lookout for potential scams so you don’t fall prey to them.
You can always trust the companies that we review here on Debt Steps. These are trusted services that will always have your best interests in mind as they help you repair your credit.