The COVID-19 pandemic is having a significant financial impact on many individuals and businesses, with potentially damaging outcomes on credit scores for some. Credit repair companies are an essential service for those that find themselves with a bad credit score.
In some cases, an individual or business can become the victim of a bad credit score due to various errors made by banks and lenders. These errors can be caused by incorrect addresses, misspelt or similar names and payments which have been recorded incorrectly. Credit repair companies will check credit reports for these errors and attempt to resolve any negative items on behalf of an individual or business.
Unfortunately, many acquiring banks will refuse to work with your business, as credit repair is considered a high-risk industry. However, as a specialist in high risk payment processing, T1 payments understand the credit repair business model, which is why we offer credit repair merchant accounts that allow for the acceptance of credit card payments from clients.
Due to the nature of the industry, it is the customers of a credit repair business that results in the high-risk perception. While a credit repair company is designed to help improve the credit scores of their clients, in the eyes of an acquiring bank, there is no guarantee that all cases of bad credit have been caused by reporting errors. The concept of working with clients that present undesirable credit scores is something that holds an element of “risk by association” for the merchant.
Credit repair companies start the repair process by requesting a copy of their client’s credit report from the three main credit bureaus: Experian, Equifax, and TransUnion. Once received, the company will then review the report to check for any derogatory marks, these include charge-offs, tax liens and bankruptcies.
A plan for disputing any errors and working with creditors to remove the items is then set by the credit repair company. Typically, this plan can include credit dispute letters to the credit bureaus, requests to validate information in the report or cease-and-desist letters to debt-collectors.
According to the Federal Trade Commission, one in every five consumers in the US has an error on one of their credit reports , making them appear ‘riskier’ than they are. When combined with the fact that 12% of the U.S population has a poor FICO credit score of 550 or lower, there are millions of individuals being punished by credit score inaccuracies.
Credit Bureaus – Private companies which compile an individual’s credit history and provide credit reports to lenders and creditors to help them make important decisions based on creditworthiness.
FICO – A type of credit score created by the Fair Isaac Corporation.
Charge-offs – A declaration by a creditor that an amount of debt is unlikely to be collected.
Tax liens – A legal claim against the assets of an individual or business that fails to pay taxes owed.