Credit Repair Companies

By: EconomyWatch   Date: 25 August 2009

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EconomyWatch

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Every person who has taken a loan or owns a credit card has a credit record. This record is a very powerful instrument that is frequently used by financial institutions, insurance companies and even employers to verify your credit worthiness.

 

If your credit score is low, you have to opt for one of the two available choices:

  • Pay high interest rates

  • Work towards improving your score

 

Credit Repair Companies: How do they help?

Most people will opt to improve their credit scores rather than suffer due to past actions and lose out to high interest rates. Credit repair involves two crucial steps:

  • Identifying mistakes in the credit report and getting them rectified by the relevant credit reporting agency (CRA)

  • Paying off outstanding dues and charge-offs on past debts and making timely payments on current debts

 

However, if there is incorrect information in your credit report, it needs to be taken care of immediately. According to the Fair Credit Reporting Act (FCRA), consumers can dispute and get mistakes in their credit reports rectified for free. However, the entire process may be very time consuming, since it involves:

  • Applying for credit reports

  • Reviewing and highlighting errors

  • Documenting mistakes

  • Typing out letters to relevant CRAs and mailing them

Thus, you may find it easier to enlist the help of credit repair companies. These firms take on the responsibility for this entire daunting task for a fee. In addition, they add professionalism to the entire process, saving you a lot of time.

 

Credit Repair Companies: What to Look For Before Hiring

Before hiring a credit repair company, go through the following steps:

  • Research the company before visiting it.

  • Check with the ECRA (Ethical Credit Repair Alliance) to verify whether the firm is a member in good standing.

  • Ensure that there are no open and unresolved disputes or complaints against the firm.

  • Verify whether there are any pending legal investigations against the firm. To do so, you can check with your state Attorney General's office or consumer agencies in other states.

 

Credit Repair Companies: Danger Signs

You must avoid hiring credit repair companies that:

  • Ask you to pay for credit repair before providing services. This is a direct violation of the Credit Repair Organizations Act (CROA).

  • Advise you to dispute all negative information in your credit report. While this rarely improves your credit score, it would definitely waste a lot of your money and time.

  • Offers to help you get a new credit identity through file segregation. This practice is a federal and state felony.


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