Credit repair is the solution you need when you find mistakes and errors in your credit report.
A basic definition of credit repair
Credit repair is a financial process that allows you to correct mistakes and errors in your credit report. By technical definition, any item contained in your credit report that cannot be verified must be removed. You request removal by disputing an item with the credit bureau that issued that particular credit report. The credit bureau has 30 days from the date they receive the dispute to verify the item with the original creditor. If they can’t verify it, they must remove it, by law. That process is called credit repair.
Credit repair vs credit repair services
It’s worth noting that there’s a difference between credit repair and credit repair services. Credit repair refers to the process of making disputes to correct information in your credit report. Credit repair services refer to companies that you retain to go through the credit repair process for you. By law, consumers can hire a state-licensed attorney to make disputes with the credit bureaus on their behalf. So, credit repair companies offer credit repair services to offer an easy, hassle-free way to correct mistakes in your credit report.
Other names for credit repair
Credit repair, as a financial industry as a whole, has a less than stellar reputation. Credit repair, itself, isn’t a scam – it’s a federally protected consumer right. But there are tons of scammers hiding out in the credit repair industry. In fact, the prevalence of scams is so high that the Better Business Bureau stopped rating credit repair companies altogether.
As a result, credit repair companies sometimes call their service different things to try and get away from the scammy reputation. So, credit repair is also known as:
- Credit correction
- Credit restoration
- Fixing your credit
- Fix bad credit
- Disputing credit report errors
No matter what it’s called, the process is the same. Anyone that offers credit repair to consumers is a credit repair service or a credit repair company. In order to legally operate under that name, the organization must have at least one state-licensed attorney on staff. Then you must authorize that person to make disputes on your behalf. That’s the legal definition of credit repair services.
Other terms you need to know to understand credit repair
|Term||What it means as it relates to credit repair|
|Credit bureau (also called Credit Reporting Agency or CRA)||A credit bureau is an organization that maintains a profile of your life as a credit user. There are three main credit bureaus in the U.S.: Experian, Equifax, and TransUnion|
|Credit report||This is a document that details information about you and your credit history. Each credit bureau maintains their own version of your credit report; that’s why every consumer effectively has 3 reports.|
|Dispute||A dispute is a formal statement that you submit to a credit bureau when you believe there is an error in your credit report.|
|Verified||This is a crucial word when it comes to credit disputes. It’s the standard of proof used to judge whether an error is correct as-is or needs to be removed. If a creditor cannot prove that the item reported occurred as reported, then it must be removed, corrected or updated.|
Important names of credit repair laws
There are two federal laws that govern credit reporting and credit repair:
- The Fair Credit Reporting Act is the main legislation that protects consumers’ rights to a fair and accurate credit report. It basically says that credit bureaus must take every step possible to ensure the information contained in your credit report is accurate. Then it gives you recourse to correct information that is not accurate. Thus, the FCRA is the law that gave rise to credit repair.
- The Credit Repair Organizations Act is the law that governs credit repair companies and how they operate. It states that only a state-licensed attorney that’s authorized to make disputes on your behalf can legally repair your credit for you. It also outlines all the important disclosures and fees that relate to that service. So, if you hire someone to repair your credit for you, CROA is the law that protects your rights.
What credit repair is and isn’t
Credit repair is the best way to ensure you have a clean, error-free credit report. Credit repair is the process you use to correct credit report errors. But people often get confused about what they can and can’t do with credit repair. So, here’s a quick rundown that can help you understand the process better:
|What you can do with credit repair||What you can’t do with credit repair|
|Remove negative items in your credit report that you can prove are erroneous||Remove negative items that are accurate and verifiable|
|Update outdated account statuses and balances||Start a new credit profile to get around the errors on your existing profile|
|Remove duplicate accounts, where a single account gets listed more than once||Boost your credit score by X points, guaranteed|
|Remove negative items that are expired and should have been removed|
By definition, credit repair doesn’t necessarily improve your credit score
It’s important to understand that credit repair is not some silver bullet. It won’t instantly get your credit score to 720 or even 700. In fact, there is no way to guarantee whether credit repair will improve your credit score at all, or by how much. By definition, there’s no direct relationship between credit repair and your credit score. Credit repair focuses entirely on correcting mistakes in your credit report.
Of course, the creditors calculate your credit score based on the information contained in your credit report. So, it makes sense that removing negative items from your report would boost your score. But that makes any score increase you enjoy more of a happy side effect than a direct cure.
This means that you should be wary of any credit repair company that guarantees their credit repair service will improve your score by X points. That’s not possible. Credit scores are like finger prints – they’re highly specific to the consumer they come from. The exact score you have depends on everything that happened in your credit life up to this point.
This means that removing a single negative item would have a varying effect for different consumers. If that’s the only negative item in your report, then you might enjoy a huge jump from credit repair. But if that mistake is one negative item among many, the effect could be less.
Again, this doesn’t mean that you shouldn’t repair your credit. It just means that you need to go into credit repair with the right expectations. It also gives you an easy way to separate the scammers from the legitimate credit repair services. Scammers prey on your desire for a quick fix for your credit score, so they make bold claims about boosting your score by big numbers.
Want to know more?
Debt.com offers a comprehensive Credit Repair Guide that will tell you everything you need to know about this essential process. Learn how it works, what it costs and what results you can expect. We also compare three options for credit repair side-by-side, so you can choose the right path to repair your credit.
Once you’re ready to get started, let Debt.com match you with an accredited credit repair service so you can repair your credit without a hassle.
Article last modified on August 8, 2018. Published by Debt.com, LLC . Mobile users may also access the AMP Version: What is Credit Repair? - AMP.