The ultimate aim of any credit card owner is to maintain a good credit score. All major financial decisions depend on the consumer’s credit repair such as applying for loans, getting desired interest rates, mortgage, etc.
Even to get a good premium on insurance, the applicant needs to have a fantastic credit score. Those people who do not own a good credit score, usually look for credit repair and credit restore options. And there are multiple ways in which credit fixing services can help financially struggling individuals.
How Do You Define Credit Repair?
Credit repair is a process where a third entity such as a credit repair company applies certain strategies to remove certain pieces of information from an individual’s credit report by charging the individual a certain amount.
The credit repair entities are profit-making entities and they advertise their services as people who help users improve their credit score. This may sound shady but it is completely legal only at the federal level. But in certain states, it is taken as financial misconduct.
Many credit repair organizations market their services as helpers who assist users in expunging false, inaccurate, and obsolete information from their credit reports.
However, the reality is quite opposite, companies at times attempt to delete negative but true data from credit reports as well simply to help consumers improve their score.
How Do Credit Repair Companies Operate?
When you hire a credit repair service, the representatives negotiate on your behalf with the credit bureaus or entities that publish information on your credit report. These are usually data furnishers who work for loan issuers or banks.
The purpose here is to convince the credit bureaus to remove the negative credit details or alter them in a way that favors the person of interest.
The credit repair organizations conduct these negotiations online, through email, over the phone, or via mail. However, the mail is the preferred method that is opted by the credit repair companies and for good reasons.
It may seem immature and ineffective to mail documents to the credit bureaus, however, this is a method that credit card repair organizations always opt for.
There is another process that credit repair services use, known as “jamming”, in which constantly repeating letters are delivered to the credit bureau on the consumer’s behalf.
The idea behind the jamming approach is that if a credit repair service can deliver large amounts of repetitive dispute letters to the credit bureaus, again and again, at some point the credit bureau will not process the dispute. When 30 days pass, the account of the consumer will automatically be deleted by Fair Credit Reporting Act (FCRA).
What are the charges charged by the credit repair companies?
Credit repair organizations use two methods for charging their clients. However, the most common method used is the garden-variety subscription service, in which the organization will charge on your credit card each month for the services they did for you in the last month.
These subscriptions will cost you somewhere between $50 to $100 every month but there can be slight fluctuations. The credit repair company benefits from the subscription package because the client continues paying the fee for as long as it takes to get the desired results i.e. improvement in the credit score.
Is hiring a credit repair company really worth it?
The answer to this question is a yes! The credit repair companies hire a legal representative that has the license to operate in multiple states or offer services in a single state. In a word, yes. These legal representatives know the compulsions associated with the law of trade.
It is the years of experience of these paralegals that make the job of the credit repair companies highly effective. The legal representatives know how to use the consumer protection laws to make the consumer’s credit report viable, presentable, and positive.
The credit repair companies assist the consumers in the following ways:
- Help assess and map the credit reports
- Help consumers understand how credit scores are calculated
- Help consumers outline ways and methods that can help them increase their credit score and credit standing