How Do Credit Score Repair Agencies Work?

Your credit score and credit report are crucial for loan and credit card approval. A low credit score can hurt your chances, making it harder to get approved. Wondering how to improve your credit score? What factors caused the drop? Can a credit repair agency help? Find out how to fix your credit score and enhance your financial credibility.

What does credit repair mean?

Credit repair involves correcting errors in your credit score by filing a dispute—often with a credit repair agency. To strengthen your case, you’ll need to submit a detailed debt explanation along with supporting documents proving your claim.

What is a credit repair agency?

A credit repair agency assists consumers in improving bad credit scores by filing disputes on their behalf. Many individuals lack the knowledge or time to handle this process themselves, making these agencies a valuable resource. However, always verify the agency’s authenticity before sharing personal information. According to the Federal Trade Commission (FTC), many unauthorized agencies operate scams, so caution is essential.

What issues can occur with a credit information report?

There can be two sorts of issues causing errors in your credit information report: a. Incorrect information stored in your credit history and credit report. b. Defaulting on the payment can cause a wrong impression on your credit report for the following reasons:

• Financial hardship.
• Missed payments on credit cards due to relocating domestically/internationally.
• Disputes with the lender regarding charges or annual fees.
• Non-receipt of card statement leading to missed payments.
• Disputes with the lender on account of fraud.

Understanding your credit report

There are certain aspects you must check on your credit report that could be faulty, leading to a low score.

• Check all the open accounts: There are two cases in which an account can be stated ‘open’ without your knowledge.
  • The lending institution may have missed communicating the closure of an account.
  • The open account may not be yours. In case there are any of the above errors found, dispute it with the credit rating agency.
• Check the status of accounts: If any of your accounts has a status of ‘written-off’ or ‘settled’, it can be viewed negatively by lenders. Verify if any account is tagged incorrectly and raise a dispute if required.
• Check the payment history of every action: Any entry other than ‘000’ or ‘XXX’ under the Days Past Due section in the payment history will indicate that you have missed some payments. Alongside, make sure that you are making bill payments on time. This can help big time in improving your score; however, a minimum period of 6-8 months is required to see a change in your credit score.

Actions to be taken

Since the possible issues that can impact on a credit report are discussed above, here are the actions you can take in each case.

• Incorrect information: If you find incorrect information in your credit report, file a dispute on the respective credit bureau’s website (e.g., CIBIL). If the lender confirms the data is accurate, no changes will be made. In such cases, directly contact the lender for clarification and resolution.
• Defaulting Payments:
  • Financial hardship: If you've missed payments due to financial hardship, job loss, or an unexpected crisis, repay the amount as soon as your situation improves. To prevent legal action that could harm your credit history, inform your lender about your financial difficulties and discuss possible solutions.
  • International/domestic relocation: When relocating, transferring your loan and credit card accounts is just as important as moving your savings account. Inform your lenders in advance to avoid missed payments, late fees, and service charges, which can lower your credit score. Ensure your linked savings account remains active to prevent payment issues after relocation.
  • Disputes with a lender about charges/annual fee: Credit cards and loans come with various charges, some one-time and others recurring, such as interest rates, penalties, processing fees, maintenance charges, annual fees, replacement fees, transfer charges, and pre-closure fees. Always review these costs before signing up. Disputing charges later may negatively impact your credit score.
  • Non-receipt of the statement: Not receiving your credit card statement doesn’t exempt you from paying the outstanding balance. As per the terms, you’re still responsible for timely payments. Missing payments can result in late fees, service charges, and a drop in your credit score. Resolve the issue quickly to avoid further penalties.
  • Disputes with a lender on account of fraud: If you spot a fraudulent transaction in your credit report, immediately report it to the lender. They will investigate and provide a resolution. Act quickly to prevent the issue from affecting your credit score or leaving a negative mark on your report.

Things to remember

• A credit repair agency cannot remove or edit the information in your credit report directly.
• The online dispute resolution process is available free of cost on credit rating agency websites such as CIBIL.
• The bank/financial institution must approve of any modifications to your credit report.
• Even if you apply for credit repair through an agency, the final credit report will be sent only to the consumer on their email address or postal address. The information in the report is confidential and will not be shared with others.

Related Articles

CIBIL Grievance and Redressal Process

CIBIL Registration and Login Process

Good CIBIL Score

Equifax Credit Score