According to Steve Weissman, credit repair is part police work and part legal expertise.
“Legitimate credit repair companies know how to find errors in credit reports and know how to provide enough evidence to convince the credit reporting agencies to remove such false information,” Weissman said.
While this may not count as an episode of NCIS , Weisman, a renowned attorney, college professor, and one of the nation’s leading experts on cybersecurity, identity theft, and fraud, depicts a process not dissimilar to a criminal investigation. In this case, the “crime” involves false information that can damage you and your credibility.
Weissman, author of 50 Ways to Protect Your Identity and Credit, agreed to an exclusive interview with Investopedia to discuss credit repair, including how to find and hire the right credit repair agency and even whether to try to rebuild your credit.
Defining Credit Repair
Investopedia: Let’s start with the basics. What exactly is credit repair?
Weissman: Credit repair is the process of removing inaccurate negative information from your credit report, which will result in an improvement in your credit score. A bad credit score can affect your ability to get a loan, rent an apartment, find a job, buy insurance, etc.
It is important to emphasize that no credit repair agency can legally remove accurate negative information from your credit report, although there are many companies that attempt to do so. By law, negative information will remain on your credit report for seven years, and bankruptcy information will remain for ten years.
Investopedia: Is this something that only credit repair companies can do, or can people repair their credit by clearing up the false information themselves?
Weissman: Credit repair companies help people remove inaccurate information from their credit reports. They don’t have any more power or authority to do this than an individual would, but some people prefer a credit repair company to do this for them.
Start Credit Recovery
Investopedia: How does the credit repair process begin? How do you know if you are a good candidate for credit repair?
Weissman: If your credit score isn’t particularly good, you can hire a credit repair company to look at your credit report to determine what’s causing your low score.
Credit Repair and Credit Counseling
Investopedia: We often see ads for credit counseling on TV. Is it the same as credit repair or different?
Weissman: No. Credit counseling agencies try to negotiate plans with creditors to accept reduced payments. Some of these companies are funded in part by the credit card companies themselves, and they see it as a win-win situation for both the customer and themselves.
However, these credit counseling agencies are not credit repair companies. Credit repair companies work for individual clients who hire them to repair their credit reports and thus improve their credit scores.
Investopedia: So, do credit repair companies provide credit counseling services, or vice versa?
Weissman: Credit repair companies generally don’t offer credit counseling services, and vice versa. They each offer different services.
The effectiveness of credit repair
Investopedia: Does credit repair really work? In other words, are the jobs that credit repair companies do effective?
Weissman: Legitimate credit repair companies can work with the major credit reporting agencies, Equifax, Experian and TransUnion, to remove false negative information from your credit report, thereby improving your credit score.
Many credit reports contain incorrect information that can lower your credit score. Common incorrect information that appears on credit reports includes past due accounts that are not yours, bankruptcies of other people with similar names, misspellings of names that cause negative information about other people to appear on your report, negative information that is more than seven years old, and debts that cannot be verified and authenticated.
Investopedia: Do credit repair companies work only with credit reporting agencies, or do they sometimes also work with creditors or others in the chain?
Weissman: Although credit repair companies typically work primarily with credit reporting agencies, they may also work directly with creditors to get them to change what they report to credit reporting agencies. Credit repair companies may work extensively with creditors to convince them to correct inaccurate information that they report to credit reporting agencies or to negotiate a settlement with a creditor that will allow the creditor to report to the credit reporting agencies that a particular debt has been satisfactorily repaid.
Credit Repair Timeline and Cost
Investopedia: How long does the credit repair process typically take once it begins?
Weissman: How long it takes to repair your credit depends on how much repair is needed and how quickly the credit reporting agencies respond to requests to correct your reports.
Credit reporting agencies are required by law to investigate erroneous claims and respond within 30 days of receiving notice from someone trying to correct a credit report; however, this deadline can sometimes be extended if the credit reporting agency needs more information or documentation to complete its investigation. It is not uncommon for credit repair to take months to complete.
Investopedia: How much does it cost to use a credit repair company?
Weissman: Legitimate credit repair companies typically charge between $79 and $129 per month, and some also charge a setup fee.
Evaluating and Regulating Credit Repair Companies
Investopedia: Who regulates credit repair companies, and how can consumers know if a particular credit repair company is legitimate?
Weissman: The Federal Trade Commission (FTC) regulates credit repair companies, and consumers should seek help from them if they have questions about a credit repair company. To determine if a credit repair company is legitimate, you should check with the FTC to see if anyone has filed a complaint or lawsuit against them.
Investopedia: What legislation or laws are there to protect people from being scammed by credit repair companies?
Weissman: The Credit Repair Organizations Act (CROA) requires credit repair companies to provide you with a written contract outlining the services they will provide you and explaining your rights under the law, giving you three days’ notice of your right to cancel the contract. Contact the credit repair company to let you know how long it will take them to provide the services and to explain in detail the total cost.
Most importantly, they cannot charge you before the service is complete. This is the biggest sign of a fraudulent credit repair company. Scammers often charge high upfront fees before any services are provided.
Investopedia: Is there anything else people should know about the CROA guidelines?
Weissman: The Credit Repair Act also gives you the right to sue a credit repair company that violates the law in federal court and to recover not only compensatory damages (money to compensate you for your losses) but also punitive damages (money to penalize and punish the scammer for harming other people).
End of process
Investopedia: How do you know if your credit is repaired?
Weissman: You can determine if your credit is repaired by checking your credit report and credit score with the three major credit reporting agencies; however, you should follow up with your credit report and credit score regularly because sometimes inaccurate information that harms your credit score will be removed after being challenged, but will reappear on your credit report and lower your credit score.
Alternatives to Hiring a Credit Repair Company
Investopedia: Are there any other options besides using a credit repair company?
Weissman: In addition to using a credit repair company, you can also do it yourself. Again, you have to be aware that a credit repair service can’t do anything for you that you can’t do on your own.
However, some people prefer to have someone else do this work for them rather than doing it themselves, especially if they are not familiar with the process.
Common Misconceptions About Credit Repair
Investopedia: What common misconceptions do you think people have about credit repair?
Weissman: I think the most misunderstood aspect of the credit repair industry is (people believe) that truly negative information can be legally removed from a report.
People also believe that credit repair companies have more authority than individual consumers to take steps to remove negative information from their credit reports. Finally, I don’t think people realize how much false information often ends up on their credit reports.
Investopedia: Considering all of this, do credit repair companies do a better job than their clients can do themselves?
Weissman: Yes. Legitimate credit repair companies know how to spot errors in your credit report and how to provide enough evidence to convince the credit reporting agencies to remove the false information.
Final Thoughts
Investopedia: What do people need to know about credit repair that we haven’t asked yet?
Weissman: Credit restoration is a process that must be ongoing. Even after your credit report is repaired and your score is improved, you should review your credit report regularly with each of the three credit reporting agencies and check your credit score regularly so that if problems do arise, you can deal with them promptly rather than waiting until it’s an emergency, such as when you applied for a loan and just learned that your credit score is low.
