Are Credit-Repair Companies Legitimate?

If you have been in debt over your head it’s likely that your credit rating took quite a beating. This bad credit score can brand you as a high risk for potential lenders. This could result in declined credit applications or high-interest rates.

Fixing your credit is the first step in making sure you are in good financial standing for all your future funding needs. The problem is that many agencies which boast about helping individuals with bad credit are truly looking to pull one over on these individuals. They end up making their credit worse. In order to avoid this outcome, it’s important to understand what credit repair companies are and what they do, so that you can spot a scam from a mile away.

 What Are Credit Repair Agencies?

Also referred to as debt management organizations, credit repair companies help individuals increase their credit rating and get out of debt. Alternative names also include debt negotiation and debt settlement companies.

 What Do Credit Repair Agencies Do?

These agencies work with your creditors to negotiate payment plans and lower interest rates. They will educate you on finances and help craft a budget plan that will lead you to be debt free in the future.

In some cases, the credit repair agency will act as the middleman to distribute money to your creditors on your behalf. This works by you paying the agency a lump sum of money to cover all your bills through one payment each month. This helps to simplify the debt repayment approach as you only have to worry about one payment and one due date each month.

Credit repair agencies also work to dispute negative items on your credit report. They will draft dispute letters for all three of the major credit bureaus on your behalf. Anything found on your record that is inaccurate, is misleading, unverifiable, or biased can be disputed.

If the credit bureau can’t verify the truth of the disputed item, they’re required by law to remove it from your credit report. In some cases where a creditor went out of business, these agencies are easily able to dispute any negative recordings as the bureaus can no longer verify the correctness of the information with the creditor.

 How To Catch A Scam

If you don’t want to fall scam to credit repair agency schemes that take your money, then you should be doing the following things.

  • Google Search The Company – While this one should be pretty obvious, many people forget to do a simple search because they get too distracted in the financial process. Take the time to search the company and make sure they have a well-established site. If they have been in business for a while there should be notations about the business on review sites as well.
  • Verify The Business Age – When your finances are at risk it’s a good idea to verify a potential credit repair company has been in business for a while. You don’t want to sign up with some fly by night company that will be gone once they get your money.
  • Advertising Of Instant Results – Any knowledgeable credit consultant knows that rebuilding credit takes time. While there are some small things you can do to help boost your credit score a few points, the majority of the work is in the consistency of paying bills on time. Avoid companies promising overnight solutions.