With many people having problems getting approved for a mortgage and asking the question "Does Credit Repair Work?" I thought it might be good to answer this question.
According to the FTC - the U.S. Federal Trade Commission and the major credit bureaus of Trans Union, Equifax, and Experian - credit repair does not work.
However, from practical experience credit repair does work. I have seen loan applicants who could not get qualified for a mortgage because they had a bad credit report and low scores come back later after doing a credit repair program get qualified for a mortgage. Each needed work on their credit report and needed to improve their credit scores; they just needed fix their credit report and allow time for the effects of credit repair efforts to show up on their credit report.
The FTC and Credit Bureaus are obligated to report that credit repair does not work because of all the illegitimate credit repair companies who only serve to take consumers' money and fail to produce any results. However, for those legitimate credit repair companies who do produce results and play by the rules the FTC admonishment of the industry hurts their business efforts.
What Factors Effect How Well Credit Repair Works?
- First and foremost, work with a reputable credit repair company. Contact your local Better Business Bureau to find a company in your area. It might be a little uncomfortable, but ask around. There are a lot of people using credit repair to improve credit scores and credit reports because of the bad economy. Third, call a local mortgage company and ask them for a referral to a credit repair company. Most mortgage companies have a credit repair referral source.
- A second important factor influencing the effectiveness of credit repair is how quickly you need your credit report fixed. In most cases, by the time someone finds out about credit repair it is too late because they find out when they are applying for some type of credit like a mortgage to buy a home or refinance their current mortgage, automobile financing, or they are just trying to get a credit card.
With all the Identity Theft instances and other scams that can cause harm to our credit report without our knowing, it is always a good idea to keep a check on your personal credit report at least annually. With a proactive approach you can catch errors on your credit report and begin a credit repair program before you need credit.
- The third factor in credit repair effectiveness is how well you or your credit repair company use the federal credit laws to handle your credit repair program as well as how effective creditors and credit bureaus are in following their rules under the federal credit laws. See What Is Credit Repair for a list of applicable federal credit laws. While you may be successful in getting something removed from your credit report it is highly possible that you may be unsuccessful in removing another similar item. Success and failure in getting items removed is highly dependent on whether the creditor complies with credit law regulations like response times and sufficient hard evidence of what they report.
- The last factor in how effective credit repair is in the reporting system that creditors use to report data on you. Even though a credit repair effort may be successful of getting an item off your credit report, it is possible to find that same item back on your credit report in the future. A creditor may re-report the information they have on you - or think they have on you - no matter whether it is correct or not. It is up to you to prove them wrong - but thankfully the laws are set up for you to do so. You can protect and defend yourself.
What Does All This Mean ? Pay Attention To Credit Repair Advertising
Each of these above mentioned factors lead to a sense of credit repair being a hit or miss type process and industry. Sometimes you win, sometimes you lose. This leads to the key message about credit repair companies and their advertising: Do Not Work With Credit Repair Companies Who Guarantee Results!
No Credit Repair Company can guarantee results - period - end of story. If you are approached or see an advertisement offering 100% guarantees to improve your scores or to get items definitively and forever removed you should move along to another company.
Credit Repair Does Work
You must do the work required of you if you are doing the work yourself or you are working with a legitimate credit repair company. You can also bet that if it was a real error that was getting fixed then the chances of it staying fixed pretty good. But if you are trying to remove accurately reported delinquent records it is likely that those will come back to haunt you. It is best to stay on the up side - get your bills caught up and then pay them on time.
