We've all been there. We want that 700 credit score but we arent sure what is the best way to get there. Perhaps our revolving debt utilization is high and we think getting a bridge loan is the cure. Perhaps we have a lot of inquiries. Regardless of what your situation is, here are the things you should look for when choosing a credit repair company:
We are going to attack the fee schedule first. Then, we will go through the capabilities of a credit repair company.
I'm the first person to say that time is money and that you should pay for service rendered. Does a doctor provide a check-up for free? How about a car mechanic? Hmm, ok, well maybe you should pay a fee for assessment and strategy planning. You should also make sure that fixing your credit is going to address the reasons you wanted credit in the first place.
For instance, I told a realtor I was working with that I was striving for a 700 credit score and he told me that you only needed a 575 credit score for their rent-to-own program. Talk about barking up the wrong tree... oh well...
You do NOT want a company that charges you a flat monthly rate to repair your credit. This is because the longer they take, the more they make. Instead you want to know:
Let's take the case of removing hard inquiries from your credit report. I know a person that charges $10.00 per inquiry and then it takes 30-45 days after the inquiries are removed for your report to update. I would say this is acceptable in terms of price and the time frame is standard. Some credit repair agencies have access to a rapid re-score feature which updates your credit report in 2 weeks time.
After my free credit assessment, it was clear that I needed to remove the number of hard inquiries on my credit report. I paid a flat fee of $525 to have them removed by attorneys. There were only 17 inquiries to remove but it was handled by attorneys and I was receiving letters from bureaus confirming removal of the inquiry faster than I could turn around.
By contrast, what you are going to find is that a lot of places use a process of writing letters to the credit bureaus, which the bureau then ignores at which time they write another letter. This is a slower process, but it does work and if you are paying a fixed fee to get it done, then that is fine. On the other hand, if the credit repair company is lining their pockets for every additional month that you are subscribed to them, then insist on timelines and a money-back guarantee or discount if they fail to remove the inquiries in a timely fashion.
Of course, you can unify lawyers with letters with David Shapiro's approach.
Believe it or not, not all credit repair companies are remotely the same in their superpowers. I remember when I started out at Credit Nerds long ago. They charged me to assess my credit file and then the only solution they had for high debt-to-usage ratio was to pay the debt. And with an average credit repair company, what they did was fine. But we are out to find the ones with guerilla tactics that push the envelope. But before we do so, let's first take a look at the factors making up your FICO.
OK, so above we can see 5 things -
So, a good amount of the superpowers of a credit repair company will involve improving your score in these 5 things.
The number of recent inquires combined with the total number of hard inquiries accounts for 10% of your FICO score. The main things you want to know about removing inquiries are
There are 5 factors which go into making up your FICO credit score. The 2nd most important factor is how much revolving (credit card) debt you owe versus how much you have available. For instance, if you owe $30,000 on credit cards and you have $60,000 total available credit, then your credit utilization is 50%. On the other hand, if you owe $30,000 on credit cards and you have $100,000 available credit, then your credit utilization is 30%. To have an overall score of 700, you must have a utilization ratio of 30% or less.
An average credit repair shop will only have one strategy for dealing with high revolving debt: pay it down! Or alternatively, take out another loan (in another person or business' name) with better terms and buy the other debt out.
A superior credit repair firm can work wonders with high revolving debt using the following superpowers:
If a credit repair company does not perform full validation of debts then walk the other way. The Credit Repair Shop is very adamant about validation. Why is this? It's because most unsecured debt can be eliminated by requiring the "lender" to affirm that the debt is legitimate. This is because unsecured debt is offered by the bank in an act of fraud. The CEO of the bank knows it and will never affirm in written form that the debt is valid. Instead, they will simply discharge the debt.
I would be surprised if you ever got credit from that particular bank again. But I did get credit from the places that I discharged debts from in my bankruptcy, so you never know.
Taking again our example of a person who owes $30,000 on credit cards and has $60,000 total available credit, a superior credit repair service will put $40,000 of additional available credit on their profile to make their utilization 30% instead of 50%. If you want a 700 credit score, you must get your utilization ratio down to 30%. Whether that is by getting the debt discharged, paying the debt, or increasing your available credit it has to be done.
Sounds spooky, but I know a firm that does it. Credit repair is just a means to an end - getting funding. So all we need to do is hide the item from the report long enough to apply and be approved for funding.
Seasoned credit. Just liked aged wine, the older your accounts the better. And just like a good meal, you need a good mix of credit lines. A good friend of mine has a barren credit report - he pays cash for everything and only has a debit card. He has a strong score, but once the lenders go beyond the score into their report, they will not see seasoned credit, just a ghost town of a credit file with little or no activity.
This is where an exceptional credit repair service can come to the rescue. They can boost your credit file by adding a large number of tradelines. Imagine having a 50,000 Wells Fargo tradeline added to your account... the banks would be salivating to lend you currency.
Credit mix and total number of accounts makes up 10% of your FICO score while length of credit accounts for another 15%.
Paying your various obligations every month is THE most important part of your credit score, accounting for 35% of your FICO score. Missing a payment is known as a "derog" or derogatory. And a good credit reporting agency will dispute and remove these.
Once again, the superpower of debt validation rears its head and the related topic of dealing with debt collectors comes into the picture. If the lender cannot validate the debt, then it should come off the report.
It really would be nice if the protocol for dealing with debt collectors were bundled with credit repair, but I guess that's asking too much.
I've done my best to lay out the ground work for what separates average credit repair from great credit repair. I feel that credit repair is a moving topic and that this article can always be improved. That being said, I was tired of run-of-the-mill advice and wanted to expose the public to the fact that you can and should demand more of the people you are paying for credit repair.
Man, I almost forgot... you would think if a credit repair company focused on the 5 things in the credit report and had superpowers in those 5 areas you would be good to go, right? Wrong! Ever heard of e-Oscar? How about Lexis Nexis? How about Sagestream LLC? Advanced Recovery Systems? Well, I will start with a little story. The guerilla credit repair company I use went to work on my file. Soon after, I had a letter from Sagestream LLC telling me they had put a lock on my credit file... oh really? Who the heck is Sagestream LLC? It turns out they are a credit bureau outside of the big 3 that I didn't even know about. And you basic garden variety credit repair shop doesnt either. Same with Advanced Recovery Systems... yet another non-big-3 credit reporting agency. Well that's all for now, tune in for the fringe credit services article which goes over all the trimmings required of an elite credit repair agency.
That's all for now. And best of luck. Stay in touch and keep me informed of your journeys!