Are Credit Repair Companies Legitimate And Trustworthy? Find Out Here

A few spending and borrowing mistakes could impact your credit score significantly. For example, that one payment that you accidentally missed will remain in your credit report and haunt you for several years to come. In addition, a bad credit score could mean that you would have to pay a higher insurance premium, you cannot secure a cheaper loan or a credit card. 

While its impact is bad and long-standing, it does not have to be that way forever. You can take action to remedy the situation. Many people take the help of credit repair companies to fix their credit scores. But many of them are still skeptical and unsure of how credit repair companies work, their trustworthiness, and legitimacy. If these questions bother you too, don’t worry, we have all the answers.

What Is a Credit Repair Company?

Credit repair services are agencies that help you improve your credit score strategically. They guide you and act on your behalf to improve your credit repair. While most of these tasks can be done by you free of cost, hiring a credit repair company will ensure fast credit repair as they have a team of professionals who have expertise in credit repair services. 

They will be able to identify issues with your credit report, spending habits, and bill payments and then build a plan to remedy the situation for a small fee. These organizations are regulated by the Credit Repair Organizations Act (CROA) of 1996.  

Are Credit Repair Companies Legitimate?

It is legal to own, operate, or hire a credit services company. Sadly numerous fraudulent companies are posing as credit repair services and taking people for a ride. As a low credit score means higher interest rates and low borrowing capacity, most people are desperate to fix their credit reports. 

Unfortunately, in this process, they fall into the traps of fraudulent organizations. To save people from these scams, the Federal Trade Commission has come up with certain regulations under federal law to function these credit repair companies. Here are a few telltale signs that your credit repair company is authentic. A legitimate company: 

• Does Not Promise Instant Results

Credit repair is a time-consuming process. Suppose your credit repair company promises overnight results and a drastic improvement in your credit score. That’s a red flag. Suppose a company promises you a new credit identity to help you overcome your bad credit report. They might promise you everything from a new Social Security Number to remove traces of your past expenses and spending habits. Stay wary of them and report it to the federal agencies, as engaging with these agencies could result in prison time for you.

Instead, look for a company that offers a realistic timeline on the results and explains to you the process they would undertake to fix your credit score. 

• Does Not Ask for Upfront Payment

A legitimate service provider will charge you only for services that yield results. If the credit repair company asks you to make an upfront payment, this could be a scam. You could lose all your money, which you could have used to repay part of your dues, and end up struggling with your bad credit. If your credit repair company charges subscription fees, make sure it is for the previous month and not the upcoming one. Paying a flat-rate fee for repairing your credit is not legal or necessary. 

• Does Not Offer to Delete Data

If there are any discrepancies in your credit report in terms of wrong information, you should take the help of your credit repair company to delete it. However, if the company offers to delete even accurate information, it shows you do not trust them in a negative light. This is illegal and not possible to do. They might try to have it deleted, but it might not always work and could flag your profile. If the company makes promises to deliver this, that’s not a service provider you should trust.

• Offers a Written Contract

Fixing your credit score is a legal agreement that you get into with the company. So, just as in the case of any other service provider, they should offer you a contract with the terms and conditions that talk about the services to be offered, the charges, and other important clauses. If the company insists on having a verbal agreement rather than a written one to get started, it’s time to look for a new credit repair company.

You are legally allowed to take measures to repair your credit. Ask as many questions as possible, read reviews, and look for companies offering genuine consultation rather than trying to take you for a ride. Do not fall for a credit repair scam and further hurt your finances.