Definition
A credit repair service is a company that disputes items on your credit report for a fee.
Analysis
Credit repair services operate by disputing every negative item on your credit report. They dispute everything negative with no regard to whether the records are accurate or not.
Credit bureaus must generally withhold disputed information from the credit report until the record is either permanently deleted or if the creditor refutes the basis for the dispute. The result is that the credit repair service will show you a credit report that appears to confirm that the records have been removed.
At this point, fees are due. It is illegal for credit repair companies to charge before services are actually rendered. This is one of the requirements under the Credit Repair Organizations Act.
Disputed items that are confirmed by the lender to be correct are restored to the credit report against the wishes of the consumer. Disputed items that are not confirmed by the lender are deleted.
The Fair and Accurate Credit Transactions (FACT) Act establishes the rights of consumers to protect inaccuracies on their credit reports. Consumers may generally do the same things that a credit repair service does on their own for free. Many credit counseling organizations will also help a consumer understand how to raise their credit scores by resolving outstanding debt or showing how to dispute incorrect information.
