Loans are not anything new. However, to qualify for one, a borrower must demonstrate their creditworthiness. Here’s where credit bureaus come in. These agencies determine a borrower’s eligibility for credit based on their:
- Payment history
- Debts
- Credit history
- Current loans
- Credit usage
They issue applicants a score based on these factors. A solid credit score is critical to securing huge loans and mortgages. On the other hand, a low score can reduce your chances of getting a loan.
However, mistakes do happen. A credit reporting agency might capture the wrong data, lowering a borrower’s credit rating. Fortunately, you can contact companies that help fix your credit to dispute these discrepancies or choose to do it yourself.
Credit Repair
Anyone who has had a loan in the past has a credit report. Credit bureaus regularly receive information from financial institutions about consumer payments. They then use this data to make credit reports. If you suspect the report does not reflect your true score or that it has issues somewhere in the entire process – from collecting data to preparing the final report – you may ask for an audit.
In most jurisdictions, you are entitled to one free copy of your credit report once a year. You can scrutinize the free credit report for errors and file a dispute if you detect inaccurate information. A successful claim often results in the removal of erroneous data in what experts call credit repair.
The goal is to identify negative items and fraudulent transactions in a credit report to improve your credit score. Proactive consumers can undertake the process independently or enlist a professional credit repair company. Since the credit system is so tedious, complex, and time-consuming, most people hire professional credit repair services to follow up on their behalf.
Let’s compare the two options, so you can decide which is best for you:
Do-It-Yourself Credit Repair
Credit repair companies work to ensure credit bureaus report accurate information. They evaluate credit reports to identify errors and spot fraudulent transactions before filing disputes on behalf of their clients when discrepancies appear in the credit report. However, these services are not free, which is why some people opt for do-it-yourself (DIY) credit repair.
DIY credit repair refers to the steps an individual takes to improve their credit rating without going through a third party. It starts with requesting a credit report from reporting agencies. Applicants are entitled to a free credit report once a year through the major credit reporting bureaus. Once they receive the credit report, they review it for inaccuracies and file disputes when they notice negative items.
The process may also entail:
- Setting up automatic payments
- Negotiating with collection agencies
- Paying off delinquent balances
- Consolidating debt
- Opening different credit accounts
- Requesting a credit limit increase
Filing a dispute is the most challenging part of repair. A borrower can dispute errors by filling out an online form, sending a dispute letter via mail, or calling credit reporting agencies.
While applicants have three options to dispute inaccuracies, following up on the progress can be tedious and intimidating. In some cases, you may be forced to settle the issue in court – which is why most applicants choose not to follow this route. Seeking professional credit repair services can help streamline the process.
Professional Credit Repair
Professional credit repair services are not different from DIY credit repair. The steps are similar. The only difference is that the former involves working with a credit repair company. Credit repair firms are more aggressive and offer comprehensive review services. They take a hands-on approach when reviewing credit reports for errors, fraudulent transactions, and other discrepancies.
Credit repair companies charge a fee based on the specific credit situation, dispute type, and inquiry interventions. They offer this with varying service packages. The tiered packages might include services like:
- Credit consultation
- Analysis
- Monitoring
- Debt validation
- Identity theft protection
The primary reason to consider professional credit repair is that these companies operate under strict regulations. In the US, credit repair companies must adhere to the Credit Repair Organizations Act. This federal law protects consumers from fraudulent credit repair firms. A credit repair company cannot demand payment before completing assigned tasks. Likewise, all contracts must be in writing, and consumers are entitled to contract cancellation rights.
While credit repair companies provide an essential service, some might not comply with the Credit Repair Organizations Act. Consumers must watch out for red flags, such as:
- Demanding payment upfront
- Unrealistic promises
- Inability to address queries appropriately
Most importantly, only consider credible companies with a proven track record.