Credit recovery services, which have seen a rise in popularity over the past two years. These companies claim to help individuals with poor credit ratings improve their scores so they can qualify for better interest rates when buying homes or cars.
You can use credit recovery services in the following situations:
- If you have a bad credit score and need to get a loan soon, such as a car or home.
- If your fine print states that you must have a high credit score to qualify for the product/service you want. This is common with private student loans, which may require an excellent credit score of 700+ to receive financing at low rates.
These services can range from anywhere from $2,000 – $10,000 typically. For this amount, they will typically monitor your accounts for 30 days and then reorganize them so that items like missed payments and late fees no longer negatively affect your FICO scores (as much). They will do this by negotiating with your creditors on your behalf. They will also add positive information to your reports if it is missing, such as a dispute they filed on your behalf, which resulted in a removed or corrected negative entry.
What Does The Credit Repair Process Entail?
Typically credit repair services provide the following: – Identify and correct errors on a client’s report, removing inaccurate/outdated negative items from their credit history. – Re-establish a client’s good standing with creditors by re-establishing credit lines that have been closed or sold off. This includes suggesting the best new product for the client based on what they are looking for and advising them of any potential drawbacks associated with it. – Negotiate fees and interest rates down to a rate that will best suit the client. (Do note that this would be rarely below 10% and more often in the range of 15-20%) – Work with creditors to ensure the client is only given the credit they can truly afford, usually by working out a manageable monthly payment plan with them. You also have the option to use them as a resource only: meaning you would still do all of the leg work on your own, but these companies would handle any negotiations for you.
In conclusion, credit recovery services can be a valuable tool in the hands of consumers who find themselves in need of credit and don’t have the necessary funds to resolve their issues. Fraudulent companies exist, though, so individuals need to look into them thoroughly before hiring one to work on their behalf.
