Borrowers with credit scores that are a few points from qualifying for a loan may be tempted to resort to credit-repair agencies for quick help in raising their scores. In some cases, the move can pay significant dividends. But industry executives and regulators say that it can often be a waste of money.
“Credit repair is sort of a pejorative term,” said Norman Magnuson, a spokesman for the Consumer Data Industry Association, a trade group for companies that track consumer credit. This is because many credit-repair agencies promise more than they deliver, Magnuson and others said.
There is no industry association for credit-repair services that could reply to these allegations.
A borrower’s credit score - also known as the FICO score, which was created by Fair Isaac Corp. in the mid-1990s - is the chief determinant of eligibility for loans. Lately, many borrowers are finding it difficult to qualify for loans unless their scores are at least 680. (The scores range from 300 to 850; the average score is 692.)
Creditors send information about consumer accounts to the three major credit bureaus - Equifax, Experian and TransUnion - which rely on complex and closely held formulas for devising their scores, using the Fair Isaac scoring method but tweaking it as they see fit. The two biggest components are consumers’ payment histories and the extent to which they are using their available credit card debt, credit counselors say.
A credit report is a list of your creditors and payment history; a credit score is a numerical reflection of that history. You can get free copies of your credit reports from all three agencies at AnnualCreditReport.com.
Loan officers and brokers say it is typical to find errors or inconsistencies in a credit report, and consumers can challenge such things by sending a letter to the credit bureau. Magnuson says the bureaus will forward the letter to the creditor in question. If the creditor does not answer the letter within 20 or 25 days, he said, the bureaus will pull that item.

sfgate.com