Can Credit Repair Hurt Your Credit?
What are the implications of a credit repair company working on your credit? Can credit repair hurt your score? Because if that’s the case, that sounds quite contradictory to the primary claim of credit repair companies, which is that they improve consumer credit scores in return for a fee. While some of these agencies are legitimate, others are, at best, temporary solutions. But as we’ll see, credit restoration can be detrimental to your score if it’s not being done correctly.
What Is Credit Repair and What Are Its Benefits?
Credit repair is the process of improving credit scores by removing negative entries and adding positive ones to your credit reports. You can perform credit repair yourself, or you can hire a credit repair agency to do the job for you. Experience matters when it comes to communicating with the credit bureaus and creditors. Doing it yourself sounds like a good way to save money, but the results may be far from satisfying.
People are fixated on their credit scores for a simple reason – they influence so much of our everyday adult life. From our chances of getting approved for a loan, purchasing a house or car, getting an excellent interest rate – all of that heavily depends on a three-digit credit score.
So if your credit score is in the ‘poor’ category (lower than 601 on the 300-850 scale), it’s understandable that you are searching for credit repair. Even scores that are lower than 700 will not allow you to obtain the best interest rates.
You need to know how to spot inefficient agencies and avoid their services. Unfortunately, not all credit repair companies are created equal.
What Are Alternative and Legit Credit Repair Services?
A legitimate credit repair company is an agency that complies with federal law. If you are unsure if the agency you came across is legit, you can look at reviews online and look at their advertised services. That way, you can assess their level of trustworthiness.
Aside from reviews, there are several aspects you should take into consideration.
- Do they have experienced credit analysts?
- Will you receive one-on-one support during the entire process?
- Do they have an investigative research team that customizes the responses back to the bureaus and creditors?
- Do they have partnered attorneys backing the credit restoration process?
Credit recovery businesses should begin their process by going through your payment history and checking it for accuracy. If they spot some inaccurate negative entries on your credit reports, they should dispute them. That means sending letters to creditors and asking them to remove those entries.
While many traditional credit repair companies stop there, other agencies go even further in their effort to fix your credit score. They employ aggressive and alternative methods. White, Jacobs and Associates has actual partnered attorneys that audit and build cases against creditors that don’t want to cooperate. By ‘cooperate,’ we mean they refuse to provide the required documentation that allows them to report these items on your credit.
So, a legitimate agency will diligently go after creditors and lenders that reported inaccurate information about you to credit bureaus. As a reminder, credit bureaus are the ones that list items in your credit reports. And your credit score is calculated using information from credit reports.
If your credit repair agency successfully disputes the questionable items, your credit score will probably go up.
When Can Credit Repair Hurt My Credit?
As we have said, traditional credit repair services usually begin and stop their process at dispute letters.
Their way of work consists of sending out generic dispute letters – usually a few at a time. In that process they could potentially hurt your credit by disputing accounts that are not negative. Removing positive accounts from your credit history has a negative effect on your credit score.
Whenever you dispute an item (correct or not), the creditor needs to respond. If they fail to respond, they are legally obliged to remove the entry from your report. See where we’re getting with this? Traditional credit repair companies send out hundreds of disputes because they’re just waiting for one of your creditors and lenders to miss a deadline. When the creditor misses a deadline for a dispute on a correct item, they need to remove it from your report. But since the item was accurate from the start, they will just add it back to your report after 2-3 months.
So a traditional credit repair company can offer a quick and temporary credit fix. That fix raises your credit. But after 2-3 months, your score will once again go down, revealing your true credit score numbers.
If you are looking for proper and long-term credit repair, make sure you work with a company that wants you to succeed long term. Along with professional support and credit repair services, their team also educates you on how to handle responsibilities in the future. They don’t offer quick fixes. They coach you. They equip you for life.