Credit Repair and Fair Credit Reporting
Some look at credit repair as an attempt to acquire something a person doesn't deserve. They see someone with a bad credit score and assume they have earned a low rating and all the consequences that come with it. They see any attempt to repair a low credit score as an attempt to evade taking responsibility for their actions. But what these credit repair critics fail to realize is your credit score in many cases is not accurate. The penalties of having a poor credit score are very real and very harsh, but in so many cases, they are undeserved.
Credit repair is not about gaming the system. Instead, credit repair is about ensuring fairness within a system where the biggest players have a stake in keeping consumer's credit scores lower than they should be.
The credit reporting system is largely influenced by the banks and lenders who use your credit scores to determine your credit risk. They use your credit scores as a gauge of how likely you are to repay your debts. The higher risk your credit score says you are, the higher interest rates they need to charge in order to insure themselves against defaulted loans. But when your credit score is lower than it should be, lenders will charge you higher interest rates than are actually necessary to protect them against you defaulting on your loans. This difference becomes increased profits for the lenders. So, from the perspective of the lender, there is motivation to keep consumers' credit scores lower than they should be.
We'd like to think that people would be more responsible than to do anything like this, but based on the way the credit system currently works, there seems to be ample evidence to the contrary. So many of the little quirks of how credit scores are calculated seem to go against the consumer. Shop around for a loan and you will have inquiries added to your credit reports that will lower your credit score just as you are trying to get approved for financing. Don't generate enough profits for your credit card company and they can lower your limits which can lower your credit score and allow them to increase your interest rates. Pay off a charged off account and see zero benefit to your credit score even though you have done the right thing. The list goes on and on.
Recognizing that the credit reporting system was stacked against the consumer, Congress passed and has on multiple occasions amended the Fair Credit Reporting Act (FCRA) to give consumers the ability to participate in the system. Additional consumer protection statutes provided consumers with other avenues for taking action on their credit. Using these acts, consumers now have the ability to influence the information their credit reports contain.
Credit repair is about using these tools to ensure the accuracy of your credit reports and the fairness of your credit score. Creditors report information about you to the credit bureaus that is used to create your credit reports. This information is then used to generate your credit score. If you do nothing about your credit, this information is assumed to be true and you will be held accountable for the credit score it produces. But as has been evidenced time and time again, this information can be inaccurate, untimely, misleading, incomplete, ambiguous, unverifiable, biased or unclear ("questionable"). When working to repair your credit, a big part of what you are doing is trying to correct or remove these questionable listings. You are acting as a balance in a system that is weighted against you, the consumer.
When working to repair your credit, it is much more about making sure you do not get taken advantage of by the credit system than the other way around.