A credit repair company is an organization that offers to improve your credit in exchange for a fee. The companies often promise to handle all the heavy lifting of working with credit reporting agencies.
Credit repair organizations are different from credit counseling agencies, which are typically a free resource from nonprofit financial education organizations that review your finances, debt and credit reports with the goal of teaching you to improve and manage your financial situation.
According to the Federal Trade Commission, the credit repair industry is fraught with scams. To help avoid scammers, it’s important to research any credit repair organization before agreeing to work with it.
Many of these companies will simply provide you with a form letter to send to the big 3 credit reporting agencies and dispute every debt listed on your report and wait to see if anyone replies.
Under the rules, if the creditor does not reply within a certain amount of time, then the debt must be taken off of your credit report. This process is supposed to be reserved for disputing debts that are not reported properly, but many credit repair companies will have you dispute all of them knowing some will not respond and, therefore, your credit score will improve.
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