How Do Credit Repairs Work?

Most of us want a good credit score, and information on credit reports and credit scores have a significant impact on our financial health and prospects that influence our daily lives.

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Data from credit reports can affect:

  • Eligibility for a loan

  • Interest rates on loans

  • Insurance premium rates

  • Job opportunities

A low credit score or mistakes on a credit report can keep you from improving your life. That’s where credit repair comes in–if your credit score has taken a hit or isn’t good enough to get by, it's time to fix your credit.

Credit repair companies improve people's credit scores by going through their credit reports and correcting or removing any negative or incorrect information that is dragging down their scores. It may sound like something too good to be true—but it’s not, and it’s very much possible.

Let’s see how you can transform your poor credit score into a healthier one that appeals to lenders and others who use it to evaluate your financial stability.

What Is Credit Repair?

Credit repair is the procedure of restoring someone’s credit score after it has deteriorated for any number of reasons. It may involve some simple administrative tasks like writing a letter to credit reporting agencies, but oftentimes, it’s more complicated and requires a lot more effort.

You may have heard people, including those you respect, say that credit repair companies are scams or that you cannot remove or correct information on your report before seven years have passed since the incident that damaged your score.  Those things are not true–they are repeating common falsehoods about credit card repair.

Laws are what make credit repairs successful, and laws are what help you get any defaulted accounts removed from credit reports before seven years have passed. Credit repair companies leverage such laws to improve your credit score; most importantly, laws state that a credit report must be accurate, timely, and verifiable. These laws allow you to fix credit mistakes.

What Can a Credit Repair Company Do That I Can’t?

When you hire or employ a credit repair service, the company's first step is to collect the current version of your credit report from the three major credit reporting agencies: Experian, Equifax, and TransUnion. Then, the company builds the groundwork needed to challenge these bureaus.

Bankruptcies, charge-offs, tax liens, and other negative entries are the items on a report that a credit repair company focuses on. When they find these, the company will sort and analyze them using years of experience and knowledge. The specialists will devise a strategy for disputing errors and negotiating with credit bureaus to get the negative reports removed from your record.

Credit bureaus have thirty days after receiving the disputes to conduct their investigation to determine whether the negative entry is accurate or not.

The results of investigations can be unpredictable–the bureaus might eliminate some or all negative entries from a credit report during the thirty-day investigation period. If this happens, the credit score should improve, but this is often not the case. If the results of the investigation are not favorable, the negative entries can become permanent on your record. The credit repair companies then do their job and make sure that any incorrect negative entries don’t stay on the records.

Help With Managing Debts

Apart from correcting wrong information or detecting fraudulent transactions, credit rebuilding and repair mostly depends on how carefully you use credit cards and when you use them. Your payment history plays a huge role in determining your credit score; the credit repairing agency will guide you to take steps to ensure that payments are current and/or improve the payment schedule for outstanding debt. 

In addition, the amount of outstanding debt you have affects your credit score–for example, even if you are making minimum payments on time, if you are actively using a large portion of the credit available to you, the size of the debt you are carrying can hurt your credit rating.

Does settling a debt hurt credit? Of course not. The problem is that your liquidity may be hampered by the amount of debt you owe. After a while, you may see improvements in your credit profile if you take the necessary steps to reduce the overall debt load.

Final Thoughts

There are some other instances when you need to consider credit repairing. If you are a victim of identity theft, for example, your credit restoration is essential and might require considerable footwork. Before choosing a credit repair company, be sure to check its authenticity and performance–of course, the experts at The Phenix Group are ready to help.

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