How Do Credit Repair Companies Actually Work in Practice?
Your credit score determines whether you’re able to get a loan, open a credit card, or even apply for a new apartment. When it’s high, you’re in great shape. When it’s low, life can seem unnecessarily hard.
If your score is low, you’re not alone. Lenders turn nearly 53% of Americans away because of bad credit scores. And many people have bad credit because of errors in their credit reports, not because of their financial situation.
If you’re one of them, hiring credit repair companies can be a good solution. Here’s what you need to know about how these services work.
They Dispute Errors on Your Report
Credit repair companies don’t necessarily help you pay off debt or consolidate your existing debt into a lower-interest repayment plan. Instead, they dispute any errors on your credit report.
Even minor errors like a closed account that’s actually open or false claims of delinquent payments can cause your credit score to drop. Though you can contest those errors on your own, credit repair companies can do it for you.
They’ll send the major credit bureaus letters disputing those errors. And they’ll send enough letters at once to cause the credit bureaus, lenders, or debt collectors to take notice. Effectively, they’ll communicate with collections agencies and credit bureaus on your behalf so you can continue focusing on your daily life.
It Won’t Work for Every Situation
Unfortunately, working with a credit repair service may not fix all low credit scores. Why? Because they focus on disputing errors.
If the information on your credit report is accurate and your score is low as a result of your financial situation, they won’t be able to help you. Instead, you’ll need to find ways to improve your score on your own.
The best place to start is by paying down your existing debt as quickly as you can. Avoid opening up new lines of credit or taking out new loans until you have less overall debt. Continue reading about the accounts on your report and monitor them for any errors that do pop up.
Choose Credit Repair Companies With Care
Though there are many credit repair companies out there, not all of them are trustworthy.
Some overcharge for their services. Others underperform and underdeliver on results.
Before you choose a service, take your time and research the company’s reputation. Read online reviews about the company to see what others have to say and shop around for the best price so you won’t end up overpaying.
Is Credit Repair Right for You?
If your credit score is low but you’re not sure why or you identify errors on your credit report, don’t wait. Contact credit repair companies to help you dispute those errors. They’ll be able to correct the problem faster and more effectively than you can on your own.
But if your score is low because you’ve gotten behind on payments and not because of errors on your credit report, you’ll be better off paying down that debt to improve your score.
Struggling with debt isn’t fun, but there’s always a way out. Check out our latest posts for more tips to help you boost your credit score and improve your finances.