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Should I Use a Credit Repair Company?

Can Credit Repair Companies be trusted?

We’ve all seen the advertisements. They convincingly entice us with the promise to remove an issue that hangs over the heads of many Americans: bad credit. For many, the idea that simply using a credit repair company can make this problem disappear into thin air can be difficult to resist.

If you think the promise that using a credit repair company can make your bad credit go away seems too good to be true, you are correct. Any company that guarantees the ability to make bad credit instantly disappear is advertising nothing more than a scam. The prospect of instantly erasing a negative credit history is hard to resist, but the only solution to the problem is time.

Use a Credit Repair Company

With the exception of bankruptcy, which takes ten years to fall off your credit report, seven years is how long it takes for bad credit history to disappear. In fact, trying to remove negative credit history from a report is a crime. Due to the unethical practices of credit repair organizations, there is even a statute in the United States’ Consumer Credit Protection Act dedicated to them. Section 401, also known as the Credit Repair Organization Act (CROA), was enacted to protect Americans from the deception of credit repair organizations. It states that credit repair organizations must keep customers fully informed and not charge a fee until after services have been provided.

What credit repair companies cannot legally ask you to do:

  • Lie about credit history when applying for a loan
  • Change your identity
  • Provide an Employer Identification Number instead of a Social Security Number
  • Give false information to a credit reporting agency

If you do any of the things mentioned above, the credit repair company is not the only one breaking the law. You are guilty of a crime known as fraud. This means using a credit repair company can potentially grant you with something much worse than bad credit: a prison sentence.

Using a credit repair company can potentially grant you with something much worse than bad credit: a prison sentence.

How Can I Fix an Error in My Credit Report?

Unfortunately, it is not uncommon for a person’s credit to be negatively affected due to errors in a report. Creditors are human and sometimes make mistakes; however, mistakes in credit history can also be due to fraud.

If you suspect that there is a mistake in your credit report, you should bring it to the credit reporting agency’s attention. It is their responsibility to provide accurate information in your report and if your suspicion is right, they will change the reporting mistakes for free.

Using a credit repair organization is completely unnecessary; there is nothing within the law that these companies can do that you are not capable of doing without them. If you already have financial troubles, the last thing you need to do is pay outrageous fees to a potentially unethical organization for a service you can do on your own.

There are three companies from which you can get an annual free credit report: Equifax, Experion, and TransUnion. Using annualcreditreport.com provides you with reports from these three companies simultaneously. It is good to have multiple sources to secure additional reliability in your credit report’s accuracy, and best of all, there is no cost. Awareness about the content of your credit report also enables you to combat identity theft.

How to Avoid Poor Credit

Because so many people suffer from bad credit, it is important to know how to avoid it. As they say in the medical field, “An ounce of prevention is worth more than a pound of a cure”. This also applies to credit because no matter how responsible you are financially after your credit becomes bad, it will still take seven years for it to go away.

How to Prevent Bad Credit:

  • Make payments on time
  • Have a credit history of sufficient length
  • Have enough accounts
  • Keep debt balances low

Keeping Debt in Check

Unfortunately, sometimes debt can be out of our control. We need an education to get the high-paying job, but we have to pay for years of tuition and do entry-level work before we get the corner office and lucrative income. Sometimes illness and injury put people out of work, and there are medical bills to pay on top of that. No matter the circumstances, we need to acknowledge our debt and take measures to decrease its accumulation.

Tips for Debt Control:

  1. Raise your income. Job searching is tedious, but every dollar counts. If you have an opportunity at a higher-paying job or are able to pick up an extra one, take it.
  2. Budget, Budget, Budget! Practice frugality and stay on top of your spending. If you don’t need it, don’t buy it.
  3. Negotiate. If you have cash, get in touch with creditors and try to reduce final settlements.
  4. Get a Plan. Find a credit counseling organization and see if you are eligible for a Debt Management Plan (DMP).

Go to Counseling (for your financial problems)

Instead of using a credit repair organization, use a credit counseling organization. These organizations are staffed with experts who even provide free educational materials and classes to teach you how to avoid and combat your financial issues.

The best thing you can do is practice responsible behavior financially, so you do not have to suffer from bad credit. If you are unable to avoid it, acknowledge the problem and the right measures to improve it. Do not fall into the trap of using a credit repair organization. The promises that they make are legally impossible, and attorney fees are expensive.