Credit Sweep: Definition, How It Works & Alternatives

Dealing with high-interest debt can be incredibly stressful, and you’re not alone in facing this challenge. In fact, nearly 49% of credit card holders carry debt from month to month. The constant worry of paying more in interest than the actual debt itself can feel like a never-ending cycle.

You might have come across the term “credit sweep” in your search for a quick solution. The idea of swiftly wiping out negative items from your credit report and boosting your credit score is certainly appealing, especially when you’re desperate to lower the costs associated with your debt.

However, it’s crucial to understand what a credit sweep really involves, how it works, its legal implications, and what alternatives you might consider.

This article is here to guide you through these details so you can make informed decisions about managing your debt and improving your financial situation.

What is a Credit Sweep?

A credit sweep refers to a process, often offered by credit repair companies, that aims to remove negative items from your credit report. The concept is simple: by challenging and disputing all negative entries on your credit report, the credit sweep promises to “clean” your credit history, thus improving your credit score. This process is often marketed as a quick fix for those struggling with poor credit scores, which can lead to better loan approvals and lower interest rates.

Line of Credit Sweep vs. Credit Sweep

Before diving deeper, it’s important to differentiate between a line of credit sweep and a credit sweep.

A line of credit sweep is a cash management tool used by businesses or individuals to optimize the use of funds in their accounts. It involves automatically transferring excess funds from a checking account into a higher interest-bearing account, such as a savings account, to maximize earnings. This process does not impact your credit report or score but is instead a financial strategy for managing cash flow.

Unlike the line of credit sweep, a credit sweep directly targets your credit report. It involves disputing and removing negative items, often under the claim that these items are fraudulent. This process, if done legitimately, can lead to an improved credit score. However, many credit sweeps offered by repair companies tread into legal gray areas, especially if the claims of fraud are false.

How Do You Do a Credit Sweep?

Understanding how a credit sweep works involves knowing the steps typically involved and recognizing the potential risks.

• Credit report analysis: The process begins with a thorough analysis of your credit report. The goal is to identify all negative items, such as late payments, charge-offs, and collections.
• Disputing negative items: Once the negative items are identified, the credit repair company will dispute them with the credit bureaus. These disputes often claim that the negative items are inaccurate or fraudulent, which requires the credit bureaus to investigate.
• Following up: After disputes are filed, there is a follow-up process to ensure that the credit bureaus respond. The Fair Credit Reporting Act (FCRA) mandates that credit bureaus must investigate disputes, typically within 30 days.
• Outcome: If the credit bureau cannot verify the disputed item, it must be removed from the credit report. This removal can potentially improve the individual’s credit score significantly.

Example of a Credit Sweep

For example, suppose you have a credit score of 600 due to several late payments and a charge-off from an unpaid credit card. A credit repair company offers to perform a credit sweep, claiming they can dispute these negative items. They file disputes with the credit bureaus, claiming the late payments and charge-off are fraudulent. The credit bureaus investigate, and if they cannot verify the accuracy of these items within 30 days, they are removed from your report. As a result, your credit score may increase, allowing you to qualify for better loan terms.

However, if these items are accurate and the disputes are unfounded, this credit sweep method could lead to legal issues and further complications down the line.

What Credit Sweep Solves (or Claims to Solve)

So what happens if you do a credit sweep? Here are some things that it may result to:

• Removal of negative items: The primary claim of a credit sweep is that it can remove negative items such as late payments, collections, charge-offs, bankruptcies, and other derogatory marks from a credit report. This removal is supposed to lead to a significant improvement in the individual’s credit score.
• Improving credit scores quickly: By removing these negative items, a credit sweep claims to help improve the individual’s credit score quickly. This can be appealing for those looking to qualify for loans, mortgages, or credit cards in a short time frame.
• Restoring financial opportunities: For individuals who have been denied credit, loans, or housing due to a poor credit score, a credit sweep might seem like a solution to restore their financial opportunities by presenting a “clean” credit history.
• Reducing financial stress: With an improved credit score, the individual may face less financial stress, as they could potentially qualify for better interest rates, lower insurance premiums, and greater access to credit.

Keep in mind that while these steps can be effective, they don’t always guarantee results. We recommend proceeding with caution if you decide to undertake a credit sweep.

Potential Issues with Credit Sweeps

Although a credit sweep may seem like a quick fix, it is important to understand that the legality and effectiveness of such services are often questionable. Consider these potential issues:

• Potential for fraud: Some credit sweep companies engage in fraudulent practices, such as claiming identity theft to remove negative items. This can have serious legal repercussions for the individual involved.
• Scams and financial loss: Many companies that offer credit sweeps charge significant upfront fees but fail to deliver the promised results, leaving individuals with the same poor credit and out of money.
• Temporary results: Even if negative items are temporarily removed during the dispute process, they might reappear once the credit bureaus verify the accuracy of the information. This means any improvement in the credit score may be short-lived.

Is Credit Sweep Legal?

Credit sweeps are legal only under rare circumstances. For instance, if you’ve been a victim of identity theft, and as a result, there are fraudulent charges or accounts on your credit report, you have the right to dispute these items and have them removed. In such cases, a credit sweep could be a legitimate way to clean up your credit report.

However, in most cases, credit sweeps are illegal, especially when the disputes involve legitimate debts or negative items that are simply inconvenient rather than fraudulent. If a credit repair company files disputes for legitimate debts, claiming they are fraudulent, this is considered fraud. Additionally, if the company advises you to file a police report falsely claiming identity theft, this is also illegal and could lead to severe legal consequences​​.

Legit Credit Repair Companies

While many credit repair companies that offer credit sweeps operate in questionable legal territory, some reputable companies offer legitimate credit repair services. These companies will review your credit report for inaccuracies, dispute genuine errors with credit bureaus, and work within the legal framework provided by the FCRA.

Here are some companies you can consider:

These companies adhere to legal standards and avoid filing false claims or advising fraudulent activities.

Alternatives to Credit Sweeps

If you want to clean up your credit report, improve your credit score, and find financial freedom, several alternatives to credit sweeps can achieve these goals legally and ethically.

1. Dispute errors yourself

You have the right to dispute any inaccuracies on your credit report yourself. This process is free and involves sending a dispute letter to the credit bureaus for any errors you find. If the credit bureau cannot verify the item, it must be removed, potentially improving your credit score.

To do a credit sweep yourself, follow these steps:

1. Obtain your credit reports from all three major bureaus (Equifax, Experian, TransUnion).
2. Check for inaccuracies like incorrect personal info or account statuses. Mark any errors found, including wrong account details or balances.
3. Collect supporting documents like payment receipts or identity theft reports.
4. Write to the bureau, explaining the error and attaching your evidence.
5. Send the letter and documents via certified mail for tracking.

The bureau has 30 days to investigate and will update you on the outcome. If the dispute succeeds, the error will be corrected or removed. If denied, provide additional evidence or escalate to the Consumer Financial Protection Bureau (CFPB).

2. Pay for delete

In some cases, creditors may agree to remove a negative item from your credit report in exchange for full payment of the debt. This is known as a “pay for delete” agreement. While not always successful, it can be an effective way to clean up your credit report and improve your score.

3. Send a goodwill letter

If you have a generally good credit history but have one or two negative items, you can request a goodwill adjustment. This involves writing to your creditor, explaining why the negative mark occurred (e.g., a one-time financial hardship), and asking them to remove it as a gesture of goodwill.

4. Consolidate your debts

If your goal is to reduce the amount you’re paying in interest, consolidating your debts into one loan with a lower interest rate might be an effective strategy. Debt consolidation won’t improve your credit score immediately but can make your payments more manageable and reduce the overall interest you pay.

5. Work on building your credit

Instead of focusing solely on cleaning up negative items from your credit report, consider proactively building your credit as a powerful alternative. By consistently making payments on bills and Buy Now, Pay Later (BNPL) purchases, you can gradually strengthen your credit profile. Cushion can assist with this by reporting these payments to credit bureaus, helping to build a positive credit history.

Summary

While the idea of a credit sweep might seem like a quick fix for improving your credit score and reducing the costs associated with outstanding debt, it’s crucial to proceed with caution. Many credit sweep services operate in a legal gray area or outright violate the law.

Instead of risking potential legal troubles, consider alternatives such as disputing errors yourself, negotiating pay-for-delete agreements, or seeking help from a credit counseling service.

These strategies may take more time and effort, but they offer a legitimate path to improving your credit and achieving financial freedom.