What Credit Repair Companies Do
Before you sign up for a credit repair company, it’s
important to understand what they do (not to mention what they don’t do).
Reputable credit repair firms work on your behalf to dispute negative items on
your credit report that may be inaccurate. They work directly with each of the
three credit bureaus: Equifax, Experian, and TransUnion. In the ideal scenario,
these negative items are removed for your report, which consequently improves
your credit score. You can then have access to better financing opportunities
when you need them.
What kind of items can be disputed with a professional company?
Common incorrect negative entries include the following:
- Negative items like late
payments that should have aged off
- Inaccurate reporting of
collections and other accounts
- Duplicate entries
- Inquiries, accounts, and
collections due to fraud or identity theft
The best credit repair companies offer a free introductory
consultation where they’ll review your credit report and let you know how
they’d tackle your problems. They should also be upfront about how likely it is
to get certain items removed. For example, a bankruptcy listing is much more
difficult to dispute than a late payment.
In addition to handling the dispute process on your behalf,
many companies offer additional services as well. They may help you monitor
your credit so you can track your progress as they work on your case. This
information lets you see the impact on your credit report and score while also
giving you an idea of when to cancel your plan.
They also help with credit-related correspondence. A
goodwill letter, for example, essentially asks your creditor to remove a late
payment from your credit report simply because your account is now in good
standing. A cease and desist letter can be used to request debt collectors stop
contacting you about your account. Depending on your financial situation, you
may or may not need these services from your chosen credit repair company.
Picking the best one is about your own personal needs and how the firm best
aligns with your goals for credit restoration.
How to Pick the Best Company
One of the most important ways to pick a credit repair
company is by using available resources to verify their information. This way,
you know you’re getting good value from the money you invest in these services
by choosing a top firm. Start by checking out company reviews online. FundFirst
Capital has a list of recommendations, and you can also see customer reviews.
Be sure to read a few different reviews to get a holistic view of how customers
have experienced each company.
You can also check the credit repair firm’s rating on the
Better Business Bureau. While you can get a general idea of their reputation by
their letter grade, read the details as well. Some companies are penalized
simply for not responding to a request for information from the BBB.
BBB ratings are a great place to start, but shouldn’t be your only source for reviewing credit repair companies.
As you narrow down your list based on reputation, next take
a look at the price versus level of service. You may notice a wide range in
monthly cost, which typically indicates there’s a difference in what you
actually get with each plan. It’s smart to find a balance between what you can
comfortably afford and what service you get that’s really relevant to repairing
your credit effectively.
If you’re already struggling with debt, you obviously don’t
want to splurge on the most expensive plan and continue to hurt your budget
each month. On the other hand, if you’re financially secure and are preparing
to fund a major purchase with a loan (like a new car or home), it may be worth
the investment to get extra services or an expedited process, even if there’s
an additional cost.
Finally, don’t be afraid to ask questions before signing up.
Whether you enroll in a free consultation or simply want to clarify details
about the process or the team. Find out who’s handling your case and what kind
of professional backgrounds are available. The best companies typically have
lawyers on staff who are well-versed in consumer rights. Credit repair is a big
deal so make sure you have the right people working for you.
Potential Red Flags
Whether you’re researching a company to work with or are
currently paying a credit repair service, be aware of some potential red flags
that may be a warning sign that you’re being scammed.
Not all credit repair companies are created equally. Do your due diligence to find the best one before you give away your personal information.
Here is a list of red flags to watch out for. If a credit
repair company does or says any of these things, you should rethink
establishing a relationship with them.
Red Flag #1: Results
No credit repair agency should ever guarantee results. This
means they shouldn’t say that they can definitely improve your score and they
absolutely shouldn’t guarantee you a specific point increase. Avoid working
with this type of company because there’s no way to 100% predict how the credit
bureaus will respond to a dispute.
Red Flag #2: Accurate
Negative Items Can Be Removed
Credit repair is certainly legal and is your right as a
consumer. However, in order to permanently remove a negative item, it must be
proven to be inaccurate, unfair, or misleading in some way. Anyone who claims
that they can get rid of anything listed on your report is not telling you the
Red Flag #3: You’re
Forbidden to Contact Credit Bureaus Directly
One of the perks of working with a credit repair company is
that you don’t have to go through the time-consuming process of contacting the
three credit bureaus on your own. That being said, they should not prohibit you
from contacting the credit bureaus yourself. This definitely indicates that
something fishy is going on.
Red Flag #4: New
A recent credit repair scheme is to create a new credit
identity for individuals. The problem is that it’s completely illegal. Whether
the company uses fake or stolen social security numbers, or has you create an
employer identification number to use for personal accounts, none of these
methods are legal or ethical. File a report with the Federal Trade Commission
to stop these scams before they go any further.
Pros and Cons of Hiring a Professional Company
Once you’ve found a reputable credit repair firm with a
strong team and legal, ethical practices, it’s time to weigh whether or not
hiring them is actually the right choice for you.
Hiring a credit repair firm does come with several
Legal Experts Working
on Your Behalf.
The credit repair process can be tricky and if you don’t
approach it in the right way, you can actually end up doing more damage to your
credit than you started with. Working with a professional team ensures you’re
maximizing your legal rights every step of the way.
Major Time Saver. While
the three major credit bureaus are legally required to respond to disputes
within 30 days, it can be an extremely time-consuming process to communicate
with them. Hiring a credit repair firm removes that burden. Plus, they’ll keep
proper documentation of every interaction with the credit bureaus and your
creditors to make sure everyone is living up to their responsibilities.
There are also a few downsides to working with a credit
repair firm, no matter how reputable they may be.
Cost Adds Up.
The major disadvantage to hiring a pro is that the cost can
quickly add up. Most agencies charge a one-time setup fee to order your credit
reports and create a strategy. After that, you’re charged month by month.
There’s no set timeline so you simply have to review your results and decide
when you want to stop the service. Luckily, most places don’t charge a
cancellation fee when you decide you’re finished.
While some credit repair companies do offer a money-back
guarantee, you don’t (and shouldn’t) get any kind of confirmation that your
credit score will definitely improve. Plus, most places advertise that it takes
at least a couple of months before you’ll notice any changes appear on your
credit report. Credit repair is a bit of a gamble in terms of whether or not
it’ll actually pay off.
Frequently Asked Questions
Do credit repair companies really work?
There are plenty of successful companies that provide their customers with positive results. Whether or not they’ll work for you depends on the items actually listed on your credit report. If you’re unsure if they qualify for credit repair, try a few free consultations to compare what the experts have to say.
How much does it cost?
The cost of professional credit repair depends on the company you choose and the level of service you select. Basic plans usually start around $70 or more a month. You can pay over $100 each month if you want more in-depth services or credit analysis. Also check to see what the company charges at the beginning of your contract to get started.
How long does credit repair take?
A good company should never give you an exact timeline because the process is so personal and depends on what credit issues are on your report. Still, you should expect to wait a minimum of one to two months before seeing any progress on your credit report.
Is it legal?
Yes, not only is credit repair legal in every U.S. state, it is also your right. There are two federal laws offering you credit protection as a consumer. The first is the Fair Credit Reporting Act (FCRA) and the second is the Credit Repair Organizations Act (CROA). Both are designed to make sure your credit information is reported and used in a way that is ethical and accurate.
How do you fix your credit for free?
It is definitely possible to fix your credit score for free. There are multiple DIY methods you can perform, just make sure you research them well before taking any action. Start by accessing your free credit report from AnnualCreditReport.com.
If you see anything that doesn’t look right, you can initiate a dispute with the relevant credit bureau. Good financial behavior moving forward also helps, like making all of your bill payments on time and paying off revolving debt from credit cards.
Find the Best Professional Firms to Improve Your Credit Score
Sign up for a free credit consultation today!
by Lauren Ward
Personal Finance Writer
Lauren Ward is a personal finance writer with nearly ten years of experience covering topics like loans, credit, and real estate. She lives in Virginia with her husband and three children.