Written by Howard Dvorkin, CPA and Chairman of Debt.com
Credit and debt go hand in hand. If you’ve faced challenges with debt, then it’s probably affected your credit, too. In many cases, you may need credit repair to correct mistakes and errors on your credit report that you may have picked up along the way. By removing these errors, you may be able to raise your credit score with each successful dispute.
Below, you’ll find highlights of a few different methods you can use to try to repair your credit. We’ll also cover a few things you should know before you get started.
Working to improve your credit? This tool can help you identify potential errors and make disputes. Try it free for 14 days.
What is Credit Repair?
Credit repair refers to the process of disputing mistakes and errors on your credit reports. Each credit bureau (Equifax, TransUnion, and Experian) maintains its own proprietary version of your credit report. The credit bureaus strive to maintain accurate information, but errors can occur.
Credit repair is the process you use to try and correct those errors. The Fair Credit Reporting Act (FCRA) lets you submit a dispute whenever you disagree with any information that appears on your credit report. If the information cannot be verified as accurate within 30 days (occasionally 45 days), the credit bureau must remove the item you disputed.
Money in a minute.
What is credit repair? Credit repair is a lot like auto repair. Your car breaks down, you bring it to the shop to change worn parts and clogged filters. Just like your car, your credit can run rough after it can gather mistakes that can sit to it. Maybe, a debt you never rang up, maybe someone with a similar name never paid their bills and it inventeranly got attached to your credit card.
That happens more than you might think. The federal government estimates that 1 in 5 Americans have a mistake on at least one of their credit reports. That’s right, that’s more than one credit report. Each of the big three credit bureaus, Equifax, Experian and TransUnion, has one with your name on it. And you can get your report free once a year and dispute any errors.
Learn how on Debt.com and get your credit firing on all cylinders once again.
A brief history of credit repair
Modern reporting allegedly began in the 1960s when a company named TRW starting using technology to standardize credit reports. TRW assigned consumers a unique identifying number to identify them as the company expanded into a nationwide credit reporting agency. TRW later changed its name to Experian.
Before standardized credit reporting, small local agencies kept profiles on consumers to track their borrowing and debt repayment habits. Local banks used this information to help them during underwriting — to decide if an applicant should be approved for a new loan. In 1970, Congress passed the Fair Credit Reporting Act (FCRA). This law protected the rights of consumers and guaranteed the right to a fair and accurate credit report. Part of that protection was the right to dispute information that the consumer found inaccurate. Thus, credit repair was born.
Over the next decade, credit reporting agencies went from localized companies to the nationwide credit reporting agencies we know today. Almost all lenders and creditors go through the three major credit bureaus (Experian, Equifax, or TransUnion) to purchase consumer credit reports. That’s good for consumers because it means they generally only need to worry about three credit reports. As long as you review those three reports regularly and make sure they’re error-free, you can typically present the best possible credit profile when someone checks your credit.
What does credit repair do?
Credit repair allows you the chance to dispute and then correct inaccurate negative items on your credit reports that could be hurting your credit scores. If you’ve been working to get out of debt, there is a wide range of errors it can potentially create.
- Missed payments that you made on time, which could happen when you arrange a repayment plan with reduced payments.
- Incorrect account statuses, such as an account reflected as “Settled in Full” instead of “Paid in Full.”
- Outdated information, since negative accounts can only remain on your credit report for a set period.
- Re-aging, which occurs when a debt collector or creditor changes the “purge-from” date of an account and causes it to remain on your report longer than it should.
Credit repair does not give you a way of removing negative information that’s accurate and verifiable. It isn’t a magic bullet that can guarantee you a clean credit report with no negative items. If a negative item can be verified by the creditor or lender, then credit repair can’t help you remove it.
But mistakes and errors happen in credit reporting. In fact, they happen more often than you might think, especially when you face challenges with debt.
Credit repair might improve your credit score
Credit repair isn’t guaranteed to raise your credit score. But there’s a good chance it could if negative, inaccurate information is deleted from your report.
In many cases, people who have errors corrected on their credit reports see their scores improve. However, the amount the score increases can vary based on:
- Where you score started – high scores tend to increase slower than low scores
- How many other negative items you have and how long ago you incurred them
- The age of any negative information that appears on your report
If your reports contain a lot of incorrect or questionable information, the potential credit score boost from credit repair can sometimes be huge. It just depends on your unique situation.
How to Repair Your Credit
There are a few different ways to repair your credit. Which path you choose depends on:
- Your budget – i.e. how much you can afford to pay
- Your confidence level in making disputes on your own
- The number of negative items you want to dispute
The more items that you wish to dispute, the more you may potentially boost credit score. If you have a range of items to dispute, it may be worth it to spend money on a professional credit repair service. In the long-run, the money you save by securing lower interest rates with a better score may justify a little money spent upfront.
However, it is possible to repair your credit on your own for free. That’s also part of the rights protected under the Fair Credit Reporting Act. You can also find paid credit monitoring tools that help you make disputes on your own. This type of tool generally costs less than a paid repair service.
Still, whether you use the free credit repair process or work with a company, the steps in the repair process are basically the same.
- Obtain your credit reports from each of the three credit bureaus.
- Review your reports to identify potential errors and mistakes.
- Dispute any items you find, either with the credit bureau that issued the report or with the credit issuer that furnished the information.
- Wait 30-45 days while the credit bureau or issuer attempts to verify the information.
- If the information can’t be verified, then it must be removed.
- You will receive a free copy of your credit report, so you can confirm the information was removed.
The free process
If you go through the credit repair process for free, you do all of the above steps on your own. Here’s what your part of the process will look like in practice:
- You can download your credit reports for free once every twelve months. Simply go to annualcreditreport.com to get your free copies each year.
- Then you review your reports for errors focus on the section that details negative information since those are the items that are hurting your score.
- Submit your disputes online or through physical mail, making sure to provide documentation that proves your case.
It’s important to note that there’s a certain art to do-it-yourself credit repair. So, if you decide to go through this process on your own, you may need some additional guidance. Debt.com provides full instructions and tips on how to repair your credit successfully in our Free Guide for Repairing Your Credit.
This tool can help you make disputes to repair your credit on your own. Try it free for 30 days.
How do repair services work?
If you have a range of disputes to make or if you feel the disputes you need to make aren’t exactly straightforward, you may want to use a professional credit repair service. You may be more likely to get the results you want and it’s often less hassle. Just like people opt to hire professionals to manage their retirement funds or to buy or sell their home, professional credit repair could make the process easier on you.
Here’s how professional credit repair services work:
- You find a reputable credit repair company with state-licensed attorneys on staff. A company must have an attorney licensed in your state.
- You authorize the state-licensed attorney to pull your credit reports and make disputes on your behalf. This usually comes with a setup fee of around $15-$20.
- The credit repair company has their team review your reports, then they work with you to gather any necessary documentation.
- They make disputes on your behalf and keep you updated on the progress. There is usually a monthly fee that ranges from $80-$120 per month.
- Once all disputes have been closed, they provide a free copy of your credit report so you can review it.
Looking for professional help to repair your credit? Debt.com can match you with an accredited service now.
Using a credit repair application, such as Smartcredit®
There is one other path through the credit repair process that provides guidance for you to repair your credit on your own. Credit repair software and online applications help facilitate identifying potential errors and making disputes.
These platforms flag negative information on your credit report so you can verify that it’s accurate. If it’s not, these applications will help you make online disputes. Some software allows you to make disputes to the credit bureaus, while applications like Smartredit facilitate making disputes directly with the credit furnisher.
These types of applications split the difference between DIY and full-service repair companies. They walk you through the process and provide templates so you can communicate the dispute you wish to make effectively.
Step by step plan comparison
|Step||Free Credit Repair||Credit Repair Application||Credit Repair Service|
|1. Obtain your credit reports||Download them for free from annualcreditreport.com.||Sign up to review your reports through the application.||Authorize credit repair company to obtain your reports; pay a $15-20 fee.|
|2. Review your reports for errors||Note the errors so you can make your disputes||The app will flag negative items, so you can easily find and verify if the information is accurate.||A team reviews your reports for you and brings you their findings|
|3. Dispute errors to the credit bureaus||Send letters or submit disputes online and wait 30 days for a response||Use built-in action buttons to submit disputes, and receive alerts when responses become available.||A state-licensed attorney sends disputes on your behalf and keeps you updated|
One of the reasons that people are wary of credit repair companies – and credit repair, in general – is that the industry has a reputation for scams. Scammers love to prey on people’s desperation. The more panicked you are about a situation, the easier it is to convince you to make a hasty decision.
That’s why so many scams revolve around consumer debt and credit problems. It’s not just credit repair. There are debt relief scams, debt settlement scams, credit score scams – the list goes on and on. People are often desperate to get out of debt and find a quick-fix for their credit, so they’ll jump at any opportunity presented.
Warning: The Better Business Bureau (BBB) doesn’t rate credit repair companies
In most cases, one of the easiest ways to tell if a financial service is legit is to check the BBB. If a company is A+ rated, then you can have more confidence that they will provide legitimate help. Unfortunately, this protection isn’t available with credit repair companies. The Better Business Bureau doesn’t rate any company whose primary service offering is credit repair.
The reason that the BBB gives is that they will not rate companies given the number of complaints received from the industry, as a whole. They don’t feel confident giving ratings, so they avoid the credit repair industry altogether.
Does this mean credit repair is bad?
No. And it’s bad that consumers think that credit repair is bad because of the scams. A few bad apples make it seem like the credit repair process, as a whole, is fraudulent. But credit repair is a federally protected consumer right. And if you avoid credit repair because you’re worried about scams, you could miss out on the chance to easily boost your score.
The solution is not to avoid credit repair entirely, or even to avoid professional credit repair services. You simply need to take extra steps to ensure the service you choose is legitimate. And you can do that even without a BBB rating using the tips below. What’s more, if you are wary of using a third-party repair service, you can use an application that will help you along the way.
Tips for avoiding scams
- Check the company out on the Rip Off Report and Consumer Reports
- Look at independent third-party review websites for unbiased customer reviews
- Use an accredited referral service, like Debt.com, that independently verifies reputable services
- Make sure the company has an attorney on staff who is licensed to make disputes on your behalf in your state
- Check to see when they charge any fees and if the company offers a money-back guarantee
- Review all company claims and be cautious of absolutes, such as a company guaranteeing that they can improve your credit score by a certain number of points
Most companies offer a free evaluation to answer any questions you have. Use this to your advantage to get a feel for the company and make sure they’re the right fit. If you don’t get a good read, thank them for their time and say you need some time to decide. Then, continue to research your options and talk to other companies. Don’t make a decision or sign up for anything until you feel comfortable.
And don’t worry. As long as you don’t authorize the company to get your credit reports, these initial consultations should not affect your credit.
Want to avoid getting scammed? Debt.com will only match you with accredited service providers that adhere to our strict code of ethics.
Q:How long does credit repair take?
Q:How much does credit repair cost?
|DIY Credit Repair||Credit Repair Applications||Credit Repair Services|
|Free||Desktop software: $30-$399|
Applications: $13-$30 per month
|$15-$20 setup fee|
$80-$120 monthly fee
Q:Is credit repair legal in all 50 states?
Q:What do credit repair companies do?
Debt.com’s Recommended Year-Round Repair Plan
At Debt.com, it’s our mission to connect you with the services you need, right when you need them. We also want to help you avoid paying for services when you don’t need them to help you save money. So, we’ve developed this year-round credit repair plan to keep your credit profile squeaky clean 365 days a year.
- Use free credit reports to your advantage. It only takes about 10-15 minutes to download them for free. Then it takes another 30-60 minutes to review them. That way, you can see if you even need help.
- If you find errors evaluate how difficult the disputes will be. Decide if it’s something you can handle on your own. If you have any concerns that you can’t, contact a credit repair company or sign up for an application that provides support.
- Take steps to build credit as you correct any errors. Positive actions now can help raise your credit score faster if you still have negative items left after credit repair.
- Download one of your credit reports again one year later. Check to make sure any disputed items haven’t reappeared and that you don’t have any new issues to dispute.
- Download another report every four months. Since you have three reports, you can space the downloads out throughout the year to enjoy year-round credit control.
- Finally, whenever you find errors that you need help disputing, contact a credit repair company. You generally only need credit repair services when you have negative items to dispute.
There are also key times when you may want to use credit repair before you make key financing decisions. In addition, always review your reports and repair your credit, as needed:
- Before you apply for any loan
- Before applying for a new credit card
- Prior to refinancing or interest rate negotiation
- After a period of financial hardship
Credit Repair for Mortgage Approval
Making sure your credit is mortgage-ready is an essential first step in the home buying process. A few percentage points more in a mortgage interest rate can equal out to thousands over the life of your loan. What’s more, lower interest rates can also lower your monthly payments. Thus, it’s in your best interest to make sure your credit is as clean as possible. You should review and repair your credit before you prequalify for a mortgage.
12 Good Reasons to Repair Your Credit
Getting approved at the right interest rate on a mortgage isn’t the only reason you should review and repair your credit regularly. We offer twelve ways that credit repair makes it easier to get the right financing while saving money on everything from utilities to car insurance. Learn all the ways that fixing your credit can help you get to a better place financially.
Article last modified on March 24, 2020. Published by Debt.com, LLC