credit repair services typically charge a fee for their service. This could be a flat fee or monthly subscription. They may also charge a fee-per-delete, where clients only pay when an inaccurate item is removed from their report.
The credit repair industry has a reputation for scams, but legitimate companies can help people boost their scores and improve their financial health. Consumers should watch out for companies that guarantee results or promise a new credit identity.
What is credit repair?
Credit repair companies work to improve the credit of consumers by disputing information with the credit bureaus on their behalf. They also may recommend opening new accounts to add positive data to reports. They’re typically regulated by the Credit Repair Organizations Act, which says companies can’t ask for payment upfront or promise that they’ll raise a consumer’s credit score a certain amount in a specific time frame.
A legitimate credit repair company will review a consumer’s credit report from each of the three major bureaus, Experian, Equifax and TransUnion, looking for derogatory marks such as missed payments, late payments, accounts that don’t belong to the consumer, judgments, liens or bankruptcies. They will then make a plan to dispute those entries with the credit bureaus and creditors to have them removed from a consumer’s credit report.
When evaluating a credit repair service, look for companies with good customer reviews, years of experience, educational resources and the number of clients they’ve helped raise their scores. Some even disclose their average score increase for clients on their websites.
How does a credit repair company work?
A credit repair company checks your credit reports for errors that could be affecting your credit score. They then work to get the credit bureaus and creditors that have incorrect information about you to remove it or correct it on your report.
Credit repair companies also help you develop a financial plan to improve your credit in the long-term. However, they can’t guarantee that all negative items will be removed from your report, such as late payments, debt collections and bankruptcies.
It’s important to note that you can do many of the same things that credit repair companies do for free, such as requesting your credit report from each of the three credit bureaus and disputing inaccurate information. Additionally, you can increase your credit score over time by paying off debt and keeping a low credit utilization ratio. Also, any credit repair company that demands payment upfront or promises results that sound too good to be true may be a scam.
How much does a credit repair company cost?
Generally, credit repair companies charge a monthly fee to work on your behalf to dispute errors on your credit report. They may also negotiate with creditors to have inaccurate negative information removed from your report.
They usually begin by doing an initial consultation and reviewing your credit reports from Experian, Equifax, and TransUnion to identify any errors. They then create a strategy for disputing these inaccuracies and help you gather any documentation to support your disputes.
Beware of credit repair services that require payment upfront or promise a new identity (it’s illegal to do so). They should also follow the Credit Repair Organization Act and be transparent about their costs. This includes giving you a firm total on charges before they start working and three business days to cancel your agreement without penalty. They also can’t guarantee results or advise you to lie. Inaccurate negative information on your report can typically stay there for seven years.
Can I repair my credit on my own?
Credit repair companies can help a person remove inaccurate information from their credit reports, but they cannot guarantee that this will raise the consumer’s credit score. Inaccurate items can include debts that the consumer never incurred, bankruptcy filings that don’t belong to them and misspellings that mix up negative entries with those of another person with the same name.
A reputable credit repair company will review the consumer’s credit reports from each of the three major credit bureaus, Equifax, Experian and TransUnion, for errors. They will then create a strategy for disputing the errors and negotiating with creditors to have them removed.
In order to prevent scams, consumers should look for warning signs like companies that demand upfront payments or promise results that sound too good to be true. Also, be wary of companies that encourage consumers to lie on their credit applications or use an Employer Identification Number (EIN) instead of a Social Security number to build a new credit history, as this practice is illegal and rarely effective.
