Having a poor credit score can make life difficult. It could stop you from getting loans or credit cards, cause your interest rates to go up, or even make it harder for you to rent an apartment or get a job. You might be wondering what a credit repair company does if your credit is bad.
A credit repair company helps consumers improve their credit scores by identifying and disputing errors on their credit reports They work on your behalf to get inaccurate negative items removed so your credit score can increase
I’ll explain exactly how credit repair companies work, what services they provide, and whether using one is right for your situation
How Do Credit Repair Companies Work?
Credit repair companies review your credit reports from the three major bureaus – Equifax, Experian, and TransUnion. Their experts will analyze your reports to identify any mistakes negatively impacting your score.
Common errors they look for include:
- Accounts that don’t belong to you
- Outdated late payments
- Incorrect account balances
- Duplicate records
- Collections that shouldn’t be reporting anymore
After that, the credit repair company will take care of disputing these mistakes with the credit bureaus. To get the negative items taken off, you have to fill out paperwork and call and write to the bureaus.
They handle the whole process for you – compiling dispute letters, making calls, and tracking responses. Credit repair companies can also give tips on improving your credit habits going forward.
However, there are limits to what these companies can do. They cannot remove or alter any information that is accurate and reporting correctly.
What Do Credit Repair Companies Charge?
Most credit repair companies charge between $50 to $150 per month. Some may also have an initial setup fee of around $200.
The total cost depends on the extent of work needed and your desired involvement. Companies provide different service tiers based on how “hands-on” you want them to be.
For example, options may include:
-
Basic: The company handles drafting dispute letters to the credit bureaus for you to review and send.
-
Mid-level: The companydrafts customized dispute letters for you to review and send. They also make calls on your behalf.
-
Full-service: The company handles the whole dispute process for you, from writing letters to calling people and keeping track of their answers.
If a company asks for a big payment up front before they do the work, be wary. This is against the law.
What Are the Benefits of Credit Repair Companies?
The main benefit of using a credit repair company is convenience. Repairing your credit yourself involves a lot of time and patience. Companies have experts who know the dispute process inside-out, saving you effort.
Benefits include:
-
Save Time: You avoid spending hours drafting dispute letters, making calls to bureaus, and tracking responses.
-
Expertise: The companies’ experience with the dispute process helps get results.
-
Customized Plans: Based on your credit report, they create a plan tailored to your issues.
-
Offer Guidance: They provide tips to improve your credit habits going forward.
-
Handle Communication: Interacting with the bureaus can be intimidating. Companies act as a buffer.
Using a reputable credit repair company removes the hassle so you can focus on other aspects of your finances.
What Can You Do On Your Own For Free?
If you want to save money, you can repair your own credit for free. Here are some DIY steps:
-
Obtain your credit reports so you can review them for errors. You can get free weekly reports from AnnualCreditReport.com.
-
Mark any inaccurate information, like collections that aren’t yours or wrong account balances.
-
Draft dispute letters to send to the bureaus. Provide details on what is incorrect plus copies of supporting documents.
-
Make phone calls to follow up if errors are not removed promptly. Be persistent.
-
Look into goodwill removal letters to get rid of late payments.
-
Become an authorized user on someone else’s account to build positive payment history.
-
Open a credit builder loan or secured credit card to add positive lines of credit.
-
Get added as an authorized user on someone else’s credit card to build positive payment history.
With focus and diligence, you can raise your score 100 points or more within 6 to 9 months. Having patience is key.
Questions To Ask When Choosing A Credit Repair Company
Not all credit repair companies are created equal. While most are legitimate, some are scams. Ask the following when vetting providers:
-
What is your total fee structure? Avoid companies asking for large upfront payments.
-
What is your money-back guarantee? Reputable companies often offer a 60-90 day guarantee.
-
May I see recent examples of disputes you’ve filed? Assess their proficiency.
-
What credit education resources do you provide? The company should offer tools/advice.
-
May I see your certifications? Look for signs they are qualified and legally compliant.
-
How long have you been in business? Choose an established company with a solid track record.
-
Will I get a written contract? Never hire a company without a contract.
-
Are you licensed in my state? Check if the company meets your state’s requirements.
Thoroughly research any company before sharing personal information. Check the Better Business Bureau and online reviews.
When Is Professional Help Worth It For Credit Repair?
Ultimately, whether hiring a credit repair company is worthwhile depends on your individual situation.
You may want to get professional help if:
-
Your credit report contains many errors needing fixing.
-
Your score is very poor (in the 300s-500s) and requires extensive work.
-
You’ve tried self-repair without success.
-
Your time is limited due to work or family commitments.
-
You find the dispute process intimidating and confusing.
-
You want guidance to improve your long-term credit habits.
-
You can afford the monthly fees comfortably.
If your credit just needs minor “tune-ups” or you prefer a DIY approach, you can still see great results on your own. But for major improvements, the expertise of a credit repair company could be a smart investment.
The Bottom Line
Credit repair companies analyze your reports to spot inaccuracies, then work on your behalf to dispute those items with the bureaus. Their expertise can help remove negative items so your score increases more quickly.
Make sure to thoroughly research any company before signing up. While most are legitimate, scams exist. Avoid guarantees of a new credit score and upfront fees.
With reasonable expectations and the right provider, using a professional credit repair service can get your credit back on track.
What Is a Credit Repair Company?
A credit repair company is a third party, which may also be called a credit repair organization or credit services organization, that attempts to remove inaccurate and unverifiable information from your credit reports in exchange for payment.
Other services a credit repair company may offer include:
- Credit assessment
- Credit monitoring
- Communicating with creditors
- Identity theft monitoring
- Credit building tools
- Educational resources
These companies are for-profit organizations, and their services are marketed as being able to help people improve their credit. However, the Credit Repair Organizations Act (CROA) has strict rules on what credit repair companies can and cant do. More specifically, they cannot:
- Remove accurate credit report information
- Advise customers to make false statements to credit reporting agencies
- Advise customers to change their identification to prevent the credit bureaus from associating them with their credit information
- Charge fees for services that have not been fully rendered
- Guarantee that they can remove information from their credit repair customers credit reports
Additionally, the CROA also requires credit repair companies to notify their customers of the following:
- They have the right to dispute their own credit report information for free
- They can sue the credit repair company if they violate CROA
- That while the credit bureaus must maintain reasonable procedures to maintain the accuracy of credit information, mistakes may occur
How Much Does Credit Repair Cost?
Depending on the type of service you choose, you may pay anywhere from $50 to $150 per month or up to $100 per deleted tradeline from your credit reports:
- Monthly subscription: A garden-variety subscription service may include a setup fee of up to $200 and a monthly charge ranging from $50 to $150, assessed at the end of the month for services performed for that month. Some may also charge a fee for pulling your credit reports.
- Pay per delete: With this option, the credit repair company only charges you when an item on your credit report is actually deleted pursuant to their efforts. Costs will vary depending on the item. For example, you may pay $25 per bureau to remove personal information, $50 for a late payment and $100 for a bankruptcy.
Understanding The Credit Repair Process
FAQ
What do credit repair companies actually do?
Credit repair works by reviewing credit reports for errors, disputing inaccuracies with credit bureaus, negotiating with creditors to remove negative items, providing guidance on building good credit habits, and monitoring progress over time. It’s about correcting mistakes and improving your credit score.
Is it worth going to a credit repair company?
The Federal Trade Commission warns against using credit repair services that guarantee they can remove negative information that’s accurate or say they can …Dec 5, 2024.
How long does it take a credit repair company to fix your credit?
It typically takes several months, potentially six or more, for a credit repair company to fully address and improve your credit score.
Can a credit repair company erase a poor credit history?
Usually not. Companies that promise to repair your credit can’t remove true information. But negative information does go away over time.