Credit restoration and repair companies provide a legitimate service to those in need of a higher credit score. However, the industry is rife with con artists who charge high fees and offer nothing in return. You may also be able to restore good credit on your own. If you are searching for a lawful and safe way to repair your credit, do your homework and check references.
Understanding Your FICO Credit Score
Your FICO credit score is a three-digit number that predicts how risky you are as a borrower. The two biggest factors that make up your score are your history of on-time payments, 35 percent, and the amount of your outstanding balances, 30 percent. The rest of the score is made up of the length of your credit history, 15 percent, the types of credit you have, 10 percent, and how much new credit you have, 10 percent.
What Credit Restoration Can Do
Credit restoration companies charge a fee to examine and "clean" your credit reports from the three main reporting bureaus, Trans Union, Experian and Equifax. They will review your personal information and each account in detail, request that old or inaccurate information be removed, add notes to your file, and verify your current accounts, balances and personal details. This process can result in an increased credit score, and lenders will find you less risky. This results in lower borrowing costs.
What Credit Restoration Can't Do
Credit restoration companies cannot remove bankruptcies that are less than 10 years old, late payments or charge-offs that are less than seven years old. A company that offers to establish a new taxpayer identification number -- or "EIN" -- for you in order to clean your credit is acting unlawfully. It is also unlawful for a company to attempt to convince a creditor that you don't owe a debt if you are legally liable for it.
Verifying Legitimate Restoration Companies
Check the Yellow Pages or online for a local company, ask for references and find out how long the company has been in business. Find out what their fees are, and when payments are due in advance. Check the Better Business Bureau website for a record of the organization you wish to work with before you send any payments or reveal personal information. Each company is assigned a grade, and you will be able to review customer complaints. The National Foundation for Credit Counseling is another valuable, free resource.
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