If you live with bad credit, you know how difficult it can be to do anything credit related, like get a credit card, rent an apartment, or find a decent rate for car insurance. But even if your score isn’t bad, there may be room for improvement. Especially if the information that is dragging your score down is inaccurate.
Even if you have the ability to repair your own credit, using a reputable and professional credit repair company is an option—if you can afford it and can verify that the company is legitimate.
What is Credit Repair?
The Fair Credit Reporting Act entitles you to an accurate credit report, which allows you to dispute credit report information that is inaccurate, incomplete, or unverifiable. Credit repair is the process of removing this type of information from your credit report with the aim of improving your credit score. Credit repair companies dispute the information on your behalf to do so.
One in four consumers have an error on their credit report that could affect their credit score, according to the Federal Trade Commission. This error can make it difficult to get approved for credit cards and loans, and can have a negative impact on interest rates and terms.
Credit repair can help you remove:
- Accounts that don’t belong to you
- Totally on time late payment
- Incorrect balance reported
- Negative information beyond the credit reporting deadline
- Unverifiable information
How Can Credit Repair Help Your Credit Score?
Credit repair helps your credit score by removing negative items that drag it down and are inaccurate. For example, a reported 90-day late payment due to an error can lower your score by 100 points. While you have the right to debate credit report information with your own credit bureau, working with them is not always easy.
Credit bureau-related complaints surged in 2020 to a record high.
How Much Do Credit Repair Companies Cost?
By law, credit repair companies cannot charge you until after they have performed the service for you. You will find that many credit repair companies charge a monthly subscription fee to cover the cost of work done for you in the previous month.
Your total credit repair costs will vary depending on the company you choose and the amount of time you’ve been registered. To give you an idea, here are the fees some credit repair companies charge.
Don’t evaluate a credit repair company on cost alone. Consider the service you receive for the price, money-back guarantee, and results from other clients.
Once your credit improves, you may not want to remain enrolled in a credit repair program. Consider whether the services it provides are still worth the cost, or whether a free credit scoring service is more suited to your needs.
How to Find a Reputable Credit Repair Company
While some credit repair companies use fraudulent tactics, such as offering credit accounts (tradelines) or credit privacy numbers (nine-digit numbers formatted like social security numbers), there are also reputable companies that comply with the law to get results.
Check for signs that the company is legitimate. Credit repair companies must follow the Credit Repair Organizations Act, which requires them to notify you of your right to repair your own credit, prohibit prepayments, and give you the ability to cancel your contract within three business days. Any company that doesn’t follow this protocol is one to avoid. A professional website with full service and pricing information, a business address, and a customer service number is also something to look for.
Before choosing a company, compare plan details, online reviews, and Better Business Bureau complaints against other credit repair companies. And check to see which one offers a legit guarantee. It’s safer to trust a company willing to refund your fees if it doesn’t work.
Credit repair companies do not have the power to remove accurate, complete, and verifiable information from your credit report. Be wary of any credit repair company that guarantees certain results or promises to delete accurate information.
Alternatives To Paying Credit Repair
If you don’t have the budget for credit repair—or you’d rather spend the money paying off a high balance—you can repair your credit yourself. Many consumer advocate groups advise against using credit repair companies because of the many dishonest actors in the industry.
“Most credit repair companies are scams. Do it yourself for free. And if the credit bureau doesn’t fix the error, file a complaint with the Consumer Financial Protection Bureau or contact a lawyer,” it wrote. National Center for Consumer Law attorney Andrew Pizor in an email to The Balance.
If you choose to go the DIY route:
The credit bureau will investigate your dispute and update your credit report based on the results.
The DIY route means less money out of pocket, but be prepared to incur shipping costs and (potentially) hours to ship and track disputes.
Working with a nonprofit consumer credit counseling agency is another valuable and cost-effective option. Agencies can help review your finances, create a budget, and negotiate a debt management plan with your creditors to help you get stuck on overdue bills. You can find a reputable agent through National Foundation for Credit Counseling.