Even model borrowers may see their credit score drop. Sometimes, this happens due to errors in reporting. Any of the bureaus may store false information about you. If this happens, you need credit repair. But which provider is the best, and what exactly will they do to get your history back on track?
Mistakes are more common than you may think. The figures in this review of best credit repair are encouraging: last year, the average scores surged to a record high of 710, even despite COVID-19. Credit repair companies have contributed to this improvement. Here is how.
The Concept of Repair
Suppose your credit score drops unexpectedly. To check if this was fair, you need to analyze the data used by Experian, TransUnion, and Equifax. These agencies do not share databases with one another, and your lenders may send information to any of them.
The contents of each report affect the score — the most important indicator for any borrower. Two popular assessment systems in the United States are FICO and VantageScore. Both rely on a scale from 300 to 850 but use slightly different factors and classifications. For example, to have good credit according to FICO, you need at least 670 points.
All calculations are automatic. Once a negative event appears on your report, the effect is immediate. On the upside, when good credit repair companies repair your score, it rises as soon as the bureau deletes its errors.
Step 1. Collection of Information
Every US citizen is entitled to a free copy of their reports weekly. This is a special measure effective until April 20, 2022. Previously, every bureau provided just one free copy once a year. A repair firm will obtain the full records on your behalf. This service may be included in the first consultation, which is often free.
Step 2. Analysis of History
The experts will go through all of the reports, scrutinizing each line. Then, they will prioritize the errors to achieve a significant rise faster. They need to tackle the most damaging derogatories first.
Different mistakes on your records have different significance. For example, Chapter 7 bankruptcies are the most damaging, as they affect the score for 10 years. Most other derogatories remain for 7 years. In FICO and VantageScore, your payment history is the most influential component — it determines 35% and 40% of the totals, respectively.
Misspellings may have no effect on the score. The worst-case scenario is identity theft when fraudsters take out loans in your name. If you are lucky, there will be only a few mistakes, and they will be fixed with one letter (see Step 4).
Step 3. Preparation of Evidence
The experts will then collect proof to show the bureaus that the entries are erroneous. This includes bank statements and other official documents from the lenders. At this stage, professionals may send debt validation letters. These ask the institutions to prove you owe the reported amount.
Step 4. Formal Disputes
Finally, with sufficient evidence, the team can finally draft the dispute letters. It will contact the bureau or bureaus, depending on the complexity of your case. Sometimes, all three reports are flawed, so all three agencies are involved.
After receiving a claim, a bureau has 30 days to conduct an internal investigation. It will communicate with lenders to establish the truth. Afterward, it will either accept the proposed changes, reject them, or ask for more information. If you succeed, you will get a free copy of the amended report. The score will jump instantly.
It is your right to dispute any report errors. In practice, this process is often challenging and time-consuming. If the submitted evidence is incomplete, the agency will ask for more proof, which will delay the result. Credit repair companies hire professionals well-versed in consumer credit laws and formal communication.
Collection of reports, analysis, and formal disputes are the core repair services. Extras include identity theft protection, score monitoring, personal budgeting apps, etc. Customers track progress via a web portal or proprietary app. For example, Lexington Law has the highest-rated app at the moment.
How Long Does It Take?
As you can see, credit repair is a multistage process. Sometimes, customers notice the first results after just one month of service. The more mistakes there are — the longer you will spend. Planning ahead is crucial. If you intend to take out a mortgage, check your score and repair it in advance. The most complicated cases may take half a year or even longer.
Although reporting errors are not your fault, correcting them is a hassle. Credit repair companies offer the fastest way to do it. They can also help you work on two fronts — repair and rebuild credit simultaneously. For example, you could lower your credit utilization ratio. Many companies offer a wealth of educational material to help you borrow more responsibly.