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Credit Repair Companies: How they work and why should you hire them?

Having a bad credit score has a significant disadvantage. You may end up having trouble with renting an apartment, applying for a credit card, great job opportunities, or any loan. There’s still a chance to turn your bad credit score into a good one with the help of a credit repair companies.

What Causes a Bad Credit Score?

Many instances can lead to a not-so-good credit score. Some of these are: having an account gone to collections, filing for bankruptcy, defaulting on a loan, credit card charge-offs, owning maxed-out credit cards.

Many companies offer free credit reports (or a summary of how you pay your financial obligations) from major credit bureaus like Equifax and TransUnion online. Credit repair companies will use your credit history to generate credit reports. The credit bureaus will obtain the information on your credit history from banks, credit card companies, governments, collection agencies, and other sources.

Here are the five critical bases that contribute to determining your score:

  1. Payment History

It makes up the highest impact (35%) of your total score. It is your evidence of repayment throughout your credits. Whether it is a late payment, on-time payments, and how many days passed after the due date you sent fees will be included here.

     2. Amounts Owed

The total of your outstanding debt is also a significant factor to consider, which takes 30% of the score. Lenders look if you are responsible and financially stable to pay back your debts. It is also better to have an owe rather than nothing to let lenders see your capacity.

     3. Duration of Credit History

The longevity of your credit history takes 15% of the score. How long do you use credit, and how did you handle your obligations over some time. Having a long credit history is a great help to your score, as long as it doesn’t have any unfavorable information in it, such as late payments.

     4. New Loan Applications

Your new additional loans take away 10% of the score. It is where the amount of your recent credit application, accounts opened, and how long it took before you open another one belongs. For lenders, constantly applying for loans may mean that you are financially struggling and leaves a bad reflection on your score. Often using for credits makes lenders think about keeping up with your payments.

     5. Types of Credit Used

It is the last factor, and like New Loan Applications, this also contributes 10% of the total score. Gaining different types of credits like store accounts, credit cards, and installment plans shows how you manage your finances overall. If you handle your finances wisely and only apply to a credit when only needed, this will not be a problem at all.

Credit Repair Companies

Hiring credit repair companies can help you review, understand and dispute errors to repair your credit score. Credit repair services are not free of charge, of course. Still, they have the knowledge and expertise on improving the credit score that you can’t resolve on your own.

Each company has its method of repairing your credit score. To help you understand the process, here are the standard ways companies do:

First, they review your credit reports. When analyzing your credit reports, companies usually check for credit report errors. Here is an example of common issues found:

Duplicate Accounts. It means that your credit account was recorded by the bureau more than once, resulting in two separate accounts. This inaccuracy isn’t pleasant for you because it gives you more credit than you do.

Accounts you didn’t make. You will see reports behind payment already, but it doesn’t belong to you.

Inaccurate Account Information. Misspelled names with negative information may mix with yours, which will result in pulling your history to the wrong side or positive entries not appearing in your account.

Hard Inquiries. It happens when you plan to do business with a financial institution and assess your credit report to make sure you’re not a credit risk. It can be a sign of fraud, so it is better to remove it.

Second, after credit repair companies find all the discrepancies, it’s time to send a dispute. It is a request to review your credit report to verify the errors by the credit bureau. If the credit bureau cannot verify the misinformation, they will need to remove or correct them.

Traits of a Legitimate Credit Repair Company

A trustworthy credit repair company must allocate time to meet and discuss your situation with you. They should know why you need credit improvement and the issue they need to fix to help you. Giving you a copy of your contract is also an essential part. Moreover, they should provide you with the vital detail you need to know like:

Your rights as their client. Your credit repair company should explain to you your rights. If they neglect to discuss this matter with you, do not sign them unless they do so.

Discuss the process of fixing your credit score. The credit repair company should know the complete information on improving your credit score. As much as possible, explain every step of the way.

In addition, you can also ask for reviews or recommendations from other people about the company you are planning to improve your score. Most companies have websites, and they post testimonies of their clients there. You can also inquire, ask the right questions, and research what they can do for you.

How to Spot a Fake Credit Repair Company?

Scammers are everywhere. So, to avoid working with a fake credit repair company, here are some “red flags” of an illegitimate credit repair company to look out for:

They are holding back on giving information. The company must inform you of your rights as a client, such as your right to terminate the contract within three days.

Misleading answers. Answering differently or dodging questions about payment and services might indicate that the company is illegitimate.

Ask you to falsify your information. Legitimate credit repair companies will never ask you to fabricate some of your info or misrepresent yourself.

They suggest not to contact Credit Bureaus. One crucial step in repairing your credit score is to submit the inaccuracies found on your record to the bureau. So, if the credit repair company suggests not to, be suspicious.

Timeline of Credit Repair Process

Credit repair must occur within 30 days as per the law required upon receiving a request from someone who wants to fix their score. The process may take three to six months depending on these factors: how low the client’s score is, the client’s financial situation, how many issues need to be removed or corrected, and many more.

How much should you pay for a Credit Repair?

Rebuilding your credit score would be easy with the help of Credit Repair Companies. However, a client may pay $19 to $149 per month, depending on the services. Other companies also offer a money-back guarantee. There are two options for fees of credit repair service:

Monthly payment. This scheme will charge for the services rendered for a month while
Payment for each problem resolved. Fees charged for each item removed/fixed from your credit file.

Note that the client must not make payment unless the company renders services.

Want to improve your credit score? Book your FREE consultation with CREDIT REPAIR NOW!

 

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