How Does a Credit Repair Company Work?

Credit scores are highly influential in the financial decisions we make in our lives–a bad credit score makes it difficult to get a loan, a credit card, insurance, or property.

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To improve your standing, you can perform a credit repair, but this process can be tedious and confusing, especially if you’re not knowledgeable about credit regulations and consumer laws. The best way to rebuild credit is to hire a credit repair company to help you. These organizations review your credit reports, dispute credit discrepancies, and even teach you sustainable financial health while adhering to credit laws and best practices.

What Is a Credit Repair Company?

A credit repair company is an organization dedicated to helping consumers understand and repair their credit scores; they do this by analyzing their client’s credit reports and disputing inaccuracies with credit bureaus and creditors. These companies are made up of financial and legal experts who have the knowledge and experience to address credit issues–they know what to review, what can be disputed, and how to proceed.

The Credit Repair Organizations Act

The federal Credit Repair Organizations Act (CROA) defines how credit repair companies must operate to remain compliant with federal law. It also outlines practices that these organizations are not allowed to do, including:

  • Advising clients to make false statements to credit reporting agencies

  • Advising clients to change their identification (to prevent credit bureaus from associating them with their credit information)

  • Charging clients for services that haven’t been fully rendered

  • Guaranteeing they can remove information from clients’ credit reports

  • Hiding notices of their clients’ rights

  • Forcing clients to sign a waiver to give up their rights

When you’re Googling “credit repair near me” to choose a credit repair company, be thorough in reviewing the legitimacy of the organization, and beware of any company that encourages any prohibited practices under the CROA.

What Does a Credit Repair Company Do?

Credit repair companies work to improve the credit scores of their clients–but how does a credit repair company work, exactly? Here are some of the responsibilities of a credit repair company:

Review Credit Reports

To start their audits, a credit repair company would typically request and review your credit report. While doing so, they look for errors such as duplicate accounts, incorrect inquiries, and inaccurate accounts. These can negatively affect your credit score, and your credit repair company must catch them before they do.

Dispute Credit Discrepancies

Once your credit repair company has pinpointed discrepancies in your credit report, they can gather evidence and then initiate challenges by requesting a credit bureau to review the disputed information. The credit bureau must then correct or remove the inaccuracy if they can’t verify it. If needed, your credit repair company will also handle negotiations with relevant creditors.

Educate About Better Financial Health

Credit repair companies also educate clients on how to build better and sustainable credit habits, such as only using up to 30% of their line of credit, using auto-pay online services to settle recurring bills, and not applying for additional credit. They may tailor their advice to the client for better results (and to prevent them from being repeat clients).

Research Credit Laws and Best Practices

Credit repair companies are built on experience and skill. The people working with you must be up-to-date and knowledgeable about credit laws and know-how to apply best practices every step of the way–it’s always a good sign if they’ve come from an adjacent field, such as real estate, mortgages, or financial law.

The Credit Repair Process

The credit repair process starts with the credit repair company requesting a copy of your credit report from the three major consumer credit bureaus: Equifax, Experian, and TransUnion. They’ll then analyze the reports for derogatory marks, such as charge-offs, bankruptcies, and tax liens. If there are errors, they’ll set a plan to dispute them to the relevant credit bureau or creditor; this may involve sending requests to validate information, dispute erroneous negative marks, or perform a cease-and-desist. 

Can a Credit Repair Company Really Help?

While you can repair your credit score on your own, the process can get complex and troublesome, especially if you’re unaware of the ins and outs of credit law and bureaucracy.

A credit repair company can help you improve your credit score by removing inaccurate and negative marks that are damaging your score–they do this by adhering to laws and following best practices, so you can ensure you’re doing everything by the book. If you’re interested in employing a credit repair company to boost your credit score, contact The Phenix Group for a free analysis to get you started.

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