If you’ve poor credit, you can be struggling to qualify for a credit card, rent an apartment, or even get a personal loan. To aid make you a better applicant, credit repair companies frequently promise to improve your credit in return for a fee.
These companies usually offer to review your credit reports and address any negative items that they can with the credit bureaus on your behalf. It is not difficult to do most of these things on your own.
You’ve to weigh the cost advantages of paying somebody else to do those things for you, versus doing those things on your own and what your time is worth.
What is a credit repair company?
A credit repair company is an organization that provides to improve your credit in exchange for a fee.
The companies frequently promise to handle all the heavy lifting of working with the credit reporting agencies.
Credit repair companies are different from credit counseling agencies, which are a free resource from nonprofit financial organizations that can review your finances, debt, and credit reports with the objective of teaching you to manage and improve your financial situation.
According to the Federal Trade Commission, the credit repair industry is fraught with scams. To aid avoid scammers, it is important to research any credit repair organization before agreeing to work with it.
How do credit repair companies work?
Step 1: Free evaluation
When a company begins working for you, they instantly pull your credit report from all 3 credit bureaus (Equifax, Experian, and TransUnion).
During a free consultation, a repair specialist will review your report with you to see if they did be able to aid you. If you’ve negative information that can be contributing to a bad credit score, then you are the best candidate for repair.
Step 2: Identify items to dispute
Then the team feedbacks your reports in detail to identify potential mistakes and errors. This can take some 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 will collect any documentation that you’ve, which will support your dispute. Once they have got the documentation, they send it to the 3 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 3 reports from each of the 3 bureaus because they cannot all contain similar information. Every credit reporting agency contains its own data furnishers. That is what industry experts call banks, credit unions, savings and loan institutions, mortgage lenders, and credit card issuers. Not all furnishers report to all 3 bureaus. If the company doesn’t review all 3 reports, errors can be missed.
To be clear, there is nothing that credit repair companies do that you cannot do on your own. Everything a 3rd 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 cannot have as much success making disputes yourself, which means negative information may remain and continue impacting your score. Hiring a professional repair service frequently increases your chances of success.
Can a credit repair company help?
In a word, yes. These companies employ attorneys that are licensed to work in various 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 are disputing negative information on your behalf. These attorneys also apply provisions within federal customer protection laws to aid you to improve your credit history.
The best companies will help you to:
- Understand and evaluate your credit reports
- Know how your credit scores are determined
Find strategies that will increase your credit standing
But let’s make one thing clear: credit repair only cannot improve a bad score. If you’ve negative information in your credit reports that is accurate, there is nothing a credit repair company (or you) can legally do to eliminate it.
So, if negative items are correct, you will need to rebuild your credit rather than repair it. You hire these companies with the idea that they’ll delete any mistakes on your credit report. And unfortunately, such mistakes can be numerous. A congressionally mandated study found that one in 5 customers had an error on at least one of their 3 credit reports.
These are eye-opening numbers for American consumers. The results of this study make it clear that customers need to check their credit reports regularly. If they do not, they’re potentially putting their pocketbooks at risk.
How Much Does Credit Repair Cost?
If a company is legitimate and can give you results, the price is quite reasonable.
It can cost anywhere from $50 – $100 a month with no long-term commitments. For instance, Lexington Law has packages starting at $79.95 a month all the way up to $119.95. You start with a free consultation so they can review your report and then pick a package based on what they can go after.
The more expensive the package, the more they go after. For instance, the lowest tier gives you Bureau Challenges and Creditor Interventions (which alone can be good enough to improve your score significantly if it works).
The highest involves services like Cease and Desist letters to debt collectors (plus a whole host of other services, like ID theft protection). If you’re the type of person to change your car’s oil, credit repair services are not for you. You can do the research and do it yourself for less.
You cannot do it as well as the professionals but it will not cost you a penny, so the return on your investment is astronomical!
Interested in taking action to repair your credit?
YMA Finnancial LLC enjoys writing articles to help educate everyone about credit and help by providing expert credit repair services.