When repairing your credit, it’s possible to go it alone, searching through your reports line by line for incorrect information and then filing disputes on your own. It can be far less of a headache to hire a credit repair company to do all the legwork for you. Find out why it can be advantageous to hire professional credit repair service, and how legitimate companies go the extra mile to fix your credit report.
How do credit repair companies work?
Step 1: Free evaluation
When a company begins working for you, they immediately pull your credit report from all three credit bureaus (Equifax, Experian, and TransUnion). During a free consultation, a repair specialist will review your report with you to see if they’d be able to help you. If you have negative information that could be contributing to a bad credit score, then you’re a good candidate for repair.
Step 2: Identify items to dispute
Then the team reviews your reports in detail to identify potential mistakes and errors. This can take a few days to complete, as they look for things like mistakes in your payment history, duplicate accounts and expired negative items.
If they identify errors on any of your reports, they’ll collect any documentation that you have, which will support your dispute. Once they have the documentation, they send it to the three bureaus and work with them to determine if the item or items should be removed.
Step 3: Repeat for each bureau’s report
The best companies review all three reports from each of the three bureaus because they might not all contain the same information. Each credit reporting agency has its own “data furnishers.” That’s what industry experts call banks, credit unions, savings and loan institutions, mortgage lenders, and credit card issuers. Not all furnishers report to all three bureaus. If the company does not review all three reports, errors could be missed.
To be clear, there’s nothing that credit repair companies do that you can’t do on your own. Everything a third party can do for you, you can do yourself at no cost. However, doing the work on your own can be a lot of work. You also may not have as much success making disputes yourself, which means negative information may remain and continue impacting your score. Hiring a professional repair service often increases your chances of success.
Can a credit repair company really help?
In a word, yes. These companies employ attorneys that are licensed to work in many states, or only provide services in one state. These attorneys understand the nuances of the trade and the law. Their experience makes them more effective when they’re disputing negative information on your behalf. These attorneys also apply provisions within federal consumer protection laws to help you improve your credit history.
The best companies will help you to:
- Understand and evaluate your credit reports
- Know how your credit scores are determined
- Identify strategies that will continually boost your credit standing
But let’s make one thing clear: credit repair may or may not improve a bad score. If you have negative information in your credit reports that is accurate, there is nothing a credit repair company (or you) can legally do to remove it. So, if negative items are correct, you’ll need to rebuild your credit rather than repair it.
You hire these companies with the idea that they will delete any mistakes on your credit report. And unfortunately, such mistakes can be numerous. A congressionally mandated study found that one in five consumers had an error on at least one of their three credit reports. Howard Shelanski, Director of the Federal Trade Commission’s Bureau of Economics, says, “These are eye-opening numbers for American consumers. The results of this first-of-its-kind study make it clear that consumers should check their credit reports regularly. If they don’t, they are potentially putting their pocketbooks at risk.”
The study also found that one in four consumers had errors that could negatively impact their credit score.
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Separating legitimate services from scams
You may have decided that you’d rather employ a credit repair company instead of taking the free credit repair option and doing all the work yourself. But you have questions. How can you tell if a business is legitimate or some front for a scam artist? Are these services affordable? Here’s the breakdown…
Five steps the best credit repair companies won’t take
There are certain things you should be looking for when investigating credit repair companies and scammers. Legitimate companies won’t do the following five things:
- Ask for payment upfront before they start any work or charge you for the initial consultation
- Insist that you never contact the bureaus directly yourself
- Advise you to dispute information that’s accurate in your report
- Tell you to provide phony information on your applications for credit or a loan
- Forget to review your legal rights when they explain their services
If you recognize these red flags, or if the company promises that it can increase your credit score by 100 points or more, it’s a sign they’re running a scam. If you spot a scam, you can report it to the State Attorney General or the Federal Trade Commission.
Important fact: The BBB doesn’t accredit these services!
The Better Business Bureau (BBB) does not accredit any credit repair company, given the high number of fraud cases in the industry. They still provide ratings and often include warnings of government actions, so you can still check how these companies rate, but you won’t find a repair service that’s BBB-accredited.
How much do credit repair companies charge?
A credit repair company’s rate really depends on the services you require or request. A comprehensive program may provide services that include:
- 3-bureau credit monitoring
- Fraud protection and alerts
- Score tracking and alerts
- Score simulators
- Housing counseling and mortgage lender referral
- ID theft insurance
- Financial coaching and education
For this package, you could be paying anywhere from $30 to $100 per month, with a setup fee ranging from $15 to $90.
How does that cost compare to other options?
If you want to minimize the cost of repair, then you fix your credit yourself. In this case, the process can be completed for free if you file online or for less than $30 if you send disputes by registered mail with return receipt requested.
Desktop repair software starts at $30, but you don’t get much for that money. More comprehensive software packages range from $199 to $399. These platforms set alerts to track the progress of disputes and include specific templates with a convenient autofill feature.
There are also credit monitoring apps that come with built-in action items to file disputes with data furnishers. These apps flag negative information in your report. Then they give you the option of filing a dispute or asking for a good faith removal of the negative information. Apps like this have a monthly subscription cost, ranging from $10 a month to $30 per month.
Before you sign or buy anything, read the contract and ask questions about the rates and services. Offers that sound too good are usually trouble.
Protect yourself and your credit!
Getting your report and checking it for errors should be on your to-do list every year. If you don’t review your report regularly, these errors could stay for years and lower your score. This will make getting loans or credit cards with affordable rates nearly impossible. Whether you choose to use a repair company to file disputes on your behalf or choose a DIY method, you need to pay attention to your profile and take care of your credit.
Are these companies effective?
A legitimate company can help you remove negative items from your report, which may improve your score, making it easier to obtain a mortgage, car loans, credit cards or insurance. Don’t trust a company that promises to raise your score by 100 points or more. No company can guarantee that a bad score will improve. If they do, make sure they also offer a money-back guarantee if your score doesn’t change.
Is credit repair legal nationwide?
This process is legal in all 50 states. The Fair Credit Reporting Act protects the right of every consumer to ensure the accuracy of the information shown in their consumer profiles. That doesn’t mean all repair companies are legitimate. Legitimate companies only charge for services if they successfully make disputes on your behalf. If a company asks for fees upfront or makes outrageous promises, the company is most likely a scam.
How long will it take to repair my credit?
Credit repair is frequently the first step in the process of building a better credit score. The repair process takes approximately three to six months. However, it can take longer to rebuild your score, depending on how many errors you have in your report.