Can credit repair companies actually help as much as they say they can?
There is plenty of conflicting information out there about whether credit repair services actually work or if they’re really just a total scam. In truth, both are true. There are legitimate credit repair companies that can provide an immensely beneficial service to some consumers. At the same time, there are also scams out there that prey on people’s desire to instantly achieve better credit. So, do credit repair services really work the way that they claim to work in commercials?
Separating fact from fiction in advertisements
Much of the confusion about credit repair services center on what it actually does for consumers. If you only listen to the commercials, then you probably think credit repair is a service designed to improve your credit score. It’s not.
In fact, improving your credit score is not the main goal of credit repair. It’s more of a really nice side effect than the main goal.
Myth #1: Credit repair is not designed to improve your score directly
The goal of credit repair is to correct errors that can appear in your credit report. Credit repair is solely focused on accomplishing that task.
However, removing errors from your credit report may boost your credit score, but not in all cases. So, if you go into credit repair thinking you’re going to get a perfect credit score regardless of what’s happened in your credit life in the past, you’re setting yourself up for disappointment.
If you go use a credit repair service with the goal of achieving an error-free credit report, then chances are good you’ll be satisfied with the results.
Myth #2: Credit repair can’t remove just any negative information
Credit score damage is caused by past actions that make you look like a higher credit risk to creditors. Always keep in mind that your credit score is a number that tells creditors how much of a risk you are as a borrower. A high score means you’re highly likely to pay a debt back on time, so you’re a good candidate for new credit. A low score means you’re more likely to default.
So, any negative information contained in your credit report does damage your score. However, credit repair can’t just remove everything that’s negative. It can only remove the mistakes. So, if you incurred a negative item that can be verified, don’t expect credit repair to remove it. In most cases, information that is correct cannot be removed from your report.
Myth #3: Credit repair isn’t always a scam. It’s legal in all 50 states.
There are federal laws that protect consumers’ right to maintain a clean, error-free credit report. The Fair Credit Reporting Act states that every consumer has the right to correct inaccurate information in their credit profile. Meanwhile, the Credit Repair Organizations Act grants consumers the right to hire state-licensed attorneys to make disputes on their behalf. So, both credit repair as a process and credit repair services are legitimate and legal.
But again, that doesn’t mean you won’t encounter scams. They’re out there and they’ve tricked so many consumers that the Better Business Bureau doesn’t even rate credit repair companies anymore. That means that it’s up to you to research a company thoroughly to ensure you work with a legitimate service instead of a scammer.
Myth #4: Credit repair isn’t a service you need all the time
One final myth that some credit repair companies try to use to keep customers is that you need their service indefinitely. You don’t.
You only need credit repair services if there are mistakes or errors to correct in your credit report. If you don’t have any errors, then there’s no need for a credit repair service. Some companies may offer extra services, such as credit monitoring. However, just be aware that these are separate services that you can get on your own. If you want a credit monitoring tool to track changes in your credit score, shop around. Don’t just continue using a tool from a credit repair company because it’s there.
In most cases, you can find better and cheaper credit monitoring tools that are separate from credit repair services. These tools help you track changes in your score and provide alerts if new negative items show up on your credit report. When that happens, you should review the new negative item. Then you can decide if it’s a mistake and whether you want to hire a credit repair company again to dispute it for you.
How Can a Credit Repair Company Really Help Me?
A credit repair company helps you by doing all the credit repair legwork for you.
- They review your credit reports for you
- Then they identify all the potential errors you need to correct
- They also make disputes on your behalf
That last part is the most important. There’s nothing a credit repair company does that you can’t do on your own. However, they usually get better results. Credit repair companies know how to make disputes to get items removed. So, while you can repair your credit yourself, the results can vary. It isn’t as easy as you might think to get items removed through DIY credit repair. In other words, just making a dispute doesn’t guarantee a satisfactory result.
This means that if you have credit report errors that you need to correct, a credit repair service is often the best way to go. When it comes to personal finance, hiring a professional is usually the fastest, easiest way to get from Point A to Point B. So, just like you hire a financial advisor to help you make wise investment decisions, you hire a credit repair service to ensure your report is error-free.
What credit repair companies can do
A credit repair company will help you identify any items that you should request the credit bureau to verify. Verification is key – it’s the deciding factor in what can be removed and what can’t. By law, a credit bureau has 30 days to verify an item that you dispute on credit report. If they cannot verify the item, they must remove it and provide a new copy of your credit report.
This means that credit repair services are almost wholly focused on removing errors from your credit report. Here’s a list of what they can help you correct:
- Missed payments that you made on time as agreed with the creditor
- Duplicate accounts, where a loan or credit card is listed more than once on your report
- Incorrect account statuses, such as an account that says it was settled in full instead of paid in full
- Incorrect account balances, where an account says you owe more than you do
- Mistakes in personal information, such as an alias that’s not you
- Removing collection accounts that don’t actually belong to you
- Removing negative items that have expired, such as a missed payment that’s more than seven years old
- Correcting public records that are inaccurate, such as child support arrears when you’re current with your payments
And always keep in mind that not all corrections will automatically boost your score. Let’s say you find a mistake in your personal information, such as a mistaken alias. Correcting this information is useful for things like avoiding collection accounts that don’t belong to you. However, unless you already have collections accounts that aren’t yours on your report, correcting the alias may not change your score.
Warning: Finding an error doesn’t guarantee its removal
The most frustrating thing that can happen during the credit repair process is losing a dispute for an item that you know is an error. Disputes must be made in a certain way to get an item removed. If you make a dispute in the wrong way, then there’s a potential for an item to be verified even if it’s inaccurate.
The chances of this frustration increase if you face a period of financial hardship. If you request forbearance or deferment to pause or reduce your payments, then the lender shouldn’t report missed payments. But sometimes they do and then you must dispute the information. This needs to be worded in the right way because technically you didn’t make your full payment as the original loan agreement stated. So, your dispute must be worded in such a way that you force the lender to admit that the payment schedule had been adjusted and approved by them.
So, we can’t stress enough that credit repair requires at least some expertise if you want to guarantee errors get removed. Otherwise, you could be stuck with negative information that you know is wrong. That means waiting out the clock on negative items in your credit report.
A good credit repair company can still find creative ways to help you more
While the requirement for verification creates situations where errors can be verified so they don’t get removed, it can also create situations where things that aren’t errors can get removed. This specifically happens with debt collection accounts.
Debt buyers purchase and sell big portfolios of defaulted debt. Since the debt is charged-off and there’s a good chance the borrower won’t pay, these debt buyers buy debt for pennies on the dollar. They trade debts often between different companies. But all that changing hands can lead to errors.
Debt buyers often purchase debt with incomplete information. In other words, they don’t have all the information required to verify the debt is yours. As a result, if you dispute a collection account and the current debt holder can’t verify the information, then the account gets removed. That’s true even if you technically owed the money. Since they can’t fully show that, you can get off the hook in some cases.
But this doesn’t happen easily, and it doesn’t mean that you should just dispute all collection accounts to see what happens. If you have a large volume of collection accounts on your credit report, though, it may be in your best interest to try. A credit repair company can give you the best shot at getting the results you want.
What credit repair companies can’t do
As you define your expectations for credit repair, keep in mind everything that a credit repair company cannot do:
- They can’t remove negative items that can be verified.
- Even a good credit repair company can’t guarantee a perfect credit score at the end of the repair process.
- They can’t help you start a new credit profile to escape the negative information in your existing profile.
That last part is important because one of the most common credit repair scams advises you to do something illegal. The scam works like this: A company tells you they can help you start a clean credit profile from scratch. You pay them ridiculous fees to do so because you want a quick fix for your bad score. They take your money and advise you to start a new profile with a different Social Security number or Employer Identification (EIN) number. This action amounts to criminal fraud. You can face criminal charges and the company disappears with the money you paid.
Again, never go into credit repair expecting you’ll instantly achieve an 850 FICO score in 30 days. It rarely happens, and when it does it’s usually because a consumer had exactly one negative item on their credit report that’s a legitimate error. If you have 12 negative items and 5 of them are legitimate, then it’s definitely worth it to correct the other 6. However, those 5 items will probably remain. The good news is that you can build credit and achieve a better credit score even before the penalties expire.
As long as you have the right credit expectations, you should be pleased with a credit repair service
If you go into the credit repair process with the goal of achieving an error-free credit report, then chances are high that you’ll be happy you hired a credit repair service. If you still have doubts, take advantage of your free annual credit report download. Then review your reports to see what they say. If you have a big batch of negative items you can potentially dispute, then it’s probably in your best interest to hire a professional. If you don’t find any errors or only find one that you want to dispute on your own, use our Free Credit Repair Guide.
Ready to get the results you want with the help of a professional credit repair service? Let Debt.com match you with a top-rated company you can trust.
Credit Repair Service FAQ
Q: Are there fast credit repair services?
A: Credit repair, in general, is not a slow process. Reviewing your reports only takes a few hours at most, even if you have lots of negative items. Then it’s another few hours to write and send the dispute letters. Once the credit bureau receives them, they have exactly 30 days to respond.
Of course, if there’s an item in question, there may be follow-ups. But the whole process usually takes no more than 60 days. If you have lots of items to dispute, your credit repair service may decide to do them in batches. In this case, it might push the schedule out to 90 days.
And there’s no way to rush the process. You can’t pay a rush fee to a credit repair service, because they don’t control how fast the bureau responds. But you won’t need a credit repair service continually forever.
Q: Are there free credit repair services?
A: Not really. There is such a thing as free credit repair. You can go through the same process that a professional credit repair company would go through; you just do it yourself. But there’s little chance of finding a company that will make disputes on your behalf for free. Licensed attorneys are unlikely to perform credit repair services pro bono.
What you can find for free are template letters for writing disputes. Many free financial education providers offer sample dispute letters. These show you how to write disputes that have the greatest chance of success. A wrongly worded dispute can potentially lead to a rejection, meaning the item would stay on your credit report. We recommend at least referring to these templates if you’ve never gone through credit repair before.
Q: Are there online credit repair services?
A: Yes. Although most local state-licensed attorneys would have a brick-and-mortar office near you, you can find online credit repair services; these are usually national credit repair companies that serve customers in all 50 states. Just make sure if the company is a national repair service provider that they have attorneys on staff that are licensed to work in the state you reside.
Q: How can I find the best credit repair services?
A: If you’re looking for a reputable credit repair service, follow these four steps:
- Make sure they have an attorney licensed to work in your state
- Look at independent third-party review websites, consumer reports, and rip-off reports to get a read on the company.
- Find an independent company (like Debt.com) that vets services for you to connect with an accredited provider.
- Avoid companies that make claims they can’t guarantee, like improving your credit score by 100 points guaranteed.
Q: How much do credit repair services cost?
A: The average cost of credit repair services varies based on the level of service that they provide. There’s usually a setup fee to get started with the service; it generally runs between $15 and $90. Then, many credit repair services also include a monthly fee that can be anywhere from $30 to $100 per month. That fee basically covers the administration costs associated with making ongoing disputes. Credit repair companies charge a monthly fee because if you have a large number of disputes, your initial setup fee won’t cover their costs.
Again, keep in mind that most people only use a credit repair service for a few months. So, this won’t end up being a recurring cost in your budget that sticks around for years.
Ready to repair your credit now? Debt.com will connect you with an accredited credit repair service that you can trust!
Article last modified on August 15, 2018. Published by Debt.com, LLC . Mobile users may also access the AMP Version: Do Credit Repair Services Really Work? Setting the Right Expectations - AMP.