Credit repair companies have been around for decades,helping people fix their credit and get the financial help they need. But asthe economy has soured, more consumers are trying to do their own creditrepair. There is much confusion about what these companies actually do. Thereare even more questions than answers about credit repair companies. This article hopes to shed some light on this confusing area of credit repair. Below we break down common questions about how to credit repair companies operate and what a credit repair firm does.
How do credit repair companies actually work? The averageperson has limited knowledge of how credit reports are calculated and whatcredit bureaus provide. For this reason, most people simply pay bills on timeand assume their credit reports are accurate. Unfortunately this is not thecase. These companies, along with credit bureaus, use complex algorithms to calculate your credit scores and report your information to the major credit reporting agencies.
When bad credit strikes, the algorithm for calculating yourscore changes. When this happens, your score will suddenly become low. The mainreason that a score becomes low is due to too many late payments reported tothe credit bureaus. Late payments hurt your credit score because it indicatesyou did not pay your bills on time. Many people try to figure out how to fix their bad credit and end up with even lower scores than before. Be sure to discover more here!
The main role of these agencies is to calculate how long ittakes for you to pay off all your debts, and then determine your FICO score.These credit repair companies use your creditors' information to calculate yourscore. Once they have your creditors information, they contact them, sometimesasking for the creditor's consent to increase your limits or even closing accounts. Read more about credits at https://www.britannica.com/topic/credit-score.
If you try to negotiate your debts on your own, the problemcan grow exponentially since bad credit repair companies often work only withdebtors who have enough money to pay off their debts. If you try to pay offyour debt without the help of an agency, the bad news is you will have to paythe agency a fee. The good news is that once you find a good agency you won't have to pay that fee ever again.
A big problem with using an agency is the "hit"they can do to your credit report. There are three major credit bureaus and allof them report your financial information to the major credit reportingagencies. Even if the agency is good at what they do, other people can stillreport negative marks to the credit bureaus. When you pay a debt with a credit repair companies, you are agreeing to be reported by the agencies as having paid that debt. This doesn't help your credit score, but it can hurt it. Make sure to have a look here!