Is it safe to use a credit repair company?

Legitimate credit repair companies can help you eliminate inaccurate information from your credit report, which could be damaging your credit rating. However, they can't do anything for you that you can't do on your own and for free. It's important to have a good credit rating. Without it, you may be denied low-interest loans and lines of credit, a job, rent, and even an insurance policy.

If your credit report shows a history of debt problems or contains errors, you may consider using a repair service to “clean up” it. However, before you pay, learn how these companies operate. In the vast majority of cases, hiring an external company will only waste your money. A fraudulent credit repair company, for example, may claim that it can help you hide negative account information or bankruptcy.

After paying the company, they may provide you with a nine-digit number that looks like a Social Security number, calling it a credit profile number or a credit privacy number. They may also direct you to request an Employer Identification Number (EIN) from the Internal Revenue Service. Unfortunately, none of those promises are true. Credit repair companies offer to “fix your credit” by removing negative elements from your credit report.

Offer to file negative item disputes on your behalf with credit bureaus and have them removed. What is the problem with this approach? The whole strategy is based on exploiting a loophole in the credit system. When precise items are removed, it's only temporary for a few months, at best. This is where the credit repair service asks you to request an Employer Identification Number (EIN) from the Internal Revenue Service, which has the same number of digits as a social security number.

Sometimes, these companies also work with you to help you understand your credit report and monitor your credit. When that happens, the credit repair company kicks in, calling on the consumer to announce that the item was recalled and suggesting that the consumer pay more each month to “keep the momentum going and go after the rest”. That said, you can do everything credit repair companies do on your own and avoid paying costly monthly fees. Credit repair companies make sure you know when these items are removed, but they don't let you know when they reappear.

You can find ads for free credit repair companies, but this usually just means that you will receive a short free consultation. Historically, mail has been the preferred method for credit repair companies for several reasons. You may be entitled to additional free credit reports in certain circumstances, such as after placing a fraud alert, becoming unemployed or receiving public assistance, or having been denied credit or insurance in the past 60 days. If the credit bureau approves your dispute and removes the false information, you should see an increase in your credit rating.

Get the basics you need to stay on top of your credit, including access to an agency's credit rating, blocking Equifax credit reports, and alerts. If you've canceled old credit cards and don't plan to use them anymore, and they don't charge annual fees, keep those credit cards open. The first is that if the information the credit repair service is disputing is correct, they will report it again the next time they send data to the offices. Not only will this help you improve your payment history, but it will also improve your credit utilization rate, which is one of the most important factors in determining your credit score.

What might seem like a simple and positive solution to your credit situation is actually a series of false promises that are likely to hurt your credit. .

Ada Porrini
Ada Porrini

Friendly beer advocate. Incurable coffee geek. General pop culture scholar. Incurable music lover. Wannabe beer nerd.

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