Why You Should Never Use Credit Repair Companies
While credit repair companies may initially appear appealing as a quick solution to improve your credit score, it's essential to understand why they often fall short. The truth is, you have the power to handle these matters yourself - more effectively and with less expense!
To start, credit repair companies charge a monthly fee without providing any guarantees. Once you subscribe to their services, they can prolong the process for as long as possible to maximize their earnings. I've seen many clients pay anywhere from $100 to $300 every month for a year or even longer, patiently waiting for these companies to resolve their issues. Unfortunately, positive results are scarce, and sometimes their credit score even worsens. In reality, you can take that $1,000 to $3,000 you'd pay the credit repair agency and apply it towards paying off your debt in a legitimate manner.
Let's talk about the loophole that credit repair companies often exploit, which can backfire in the long run.
By law, credit bureaus must respond to every disputed item within 30 days. Credit repair companies file numerous disputes and simply wait for the credit bureaus to miss the deadline and fail to respond within the allotted time. If the credit bureau fails to meet this 30-day deadline, the credit repair company claims the item is invalid and requests its removal from your credit report.
If the item was only removed because the credit bureau missed the deadline but was actually accurate, it will likely reappear on your credit report within a few months. By law, creditors can re-verify an accurate item at any time and have it added back to your credit report, typically within 2 to 3 months.
Additionally, it's important to note that the claim the credit repair company files may not always be truthful, especially if you genuinely owe the debt. It's best to steer clear of anyone who claims they can remove a legitimate item from your credit report.
Now, let's explore some helpful information to improve your credit:
Remember, the past is the past, so be kind to yourself regarding past decisions or inaction. Today is the perfect day to make a change and take ownership of what you owe.
Items on your credit report usually remain for 7 years, even if you've paid them off in full.
Paying off your debt in its entirety may create a more favorable impression in the eyes of lenders compared to ignoring the debt or settling. It's wise to check with your lender about their specific underwriting and approval processes.
Keep in mind that creditors can sue you for the debts you owe. Familiarize yourself with the legal statute of limitations in your state.
A charge-off indicates that a lender or creditor has recorded the account as a financial loss and subsequently closed it to any further charges. In certain cases, this debt may be sold to a debt buyer or transferred to a collection agency. It's important to note that despite the charge-off, you remain legally responsible for repaying the debt.
You may have heard about the "pay for delete" strategy, but it rarely works anymore. Here's why: The most recent credit scoring models, FICO 9 and VantageScore 3.0, do not heavily penalize paid collection accounts. So although these items remain on your credit report, their negative impact is significantly reduced compared to unpaid collections. Essentially, the latest credit reporting algorithms may achieve a similar outcome as a "pay for delete" agreement on your behalf. By settling your collection accounts, you can spare yourself the effort (and potential disappointment) of negotiating such an arrangement.
Moving forward, aim to prevent any bill from going to collections by paying at least the minimum amount due on time. Once a negative item finds its way onto your credit report, it becomes challenging to remove, even if you eventually pay it off!
It's important to customize your approach based on your unique situation and the specific debts you carry. Seeking guidance from a certified expert, such as an Accredited Financial Counselor® rather than relying on credit repair services can help you develop a tailored plan to achieve your goals. Remember to grant yourself grace and time – dealing with massive credit agencies takes control out of our hands, so patience and persistence are key.
And once you improve your credit, make every effort to protect it with vigilance – treat it like gold! Reach out if you need help - we’re here for you.
