Are your credit reports filled with inaccurate and damaging information, causing your credit score to suffer? You might be considering whether to hire a credit repair company to address these issues. But is it really worth the investment? Can a credit repair company effectively improve your credit situation?
To assist you in making an informed decision, this article will explore what a credit repair company does, the costs involved, the laws governing the credit repair process, and ways you can undertake credit repair yourself.
- Assess Your Credit Situation: Consider hiring a credit repair company if your credit report has numerous errors or complex issues, especially if it’s affecting your credit score significantly.
- Understand the Cost-Benefit: Weigh the costs of credit repair services against the potential benefits to your credit score. High costs may not justify the services if your credit issues are minor or can be resolved independently.
- Consider Time and Expertise: If you lack the time or knowledge to tackle credit repair yourself and your credit issues are significant, a credit repair company’s expertise can be valuable.
- Choose carefully. The credit repair business is filled with shady players and outright scams. Study your options carefully and choose a credible partner.
What Does a Credit Repair Company Do?
Credit repair companies offer various services to help their customers improve their credit scores. These services focus on the dispute process, which allows creditors to challenge inaccurate information on credit reports
To do this, they will first analyze your credit to determine where the issues are. They will then consult with you on what services they can provide to help these issues.
Once you agree to hire the company, they will communicate on your behalf with credit bureaus, collection agencies, creditors, etc., to get these issues resolved.
Helps You File Disputes
The key service most credit repair companies offer is filing disputes. Disputes are a process for removing damaging information from your credit reports.
Damaging information can include fraud, clerical errors, accounts that should have fallen off, inaccurate collections, late payments, and more.
The credit repair company will send dispute letters to each credit bureau on your behalf and follow up with any additional information requests. It can take several sets of these letters to resolve all of the issues on your credit reports.
While these companies are only supposed to dispute inaccurate information, they will often dispute any negative information that appears on your credit reports.
⚠️ Disputing accurate information is generally a waste of time, so paying someone to do it for you may not be something you want to do.
💡 Most accurate information cannot be removed from your credit report. One exception, though without guarantees, is collection accounts. Collection agencies may not have the information needed to verify your debt, especially if it’s an old debt that has passed from one collector to another. It is worth disputing collection accounts even if you believe them to be accurate.
Additional Services Credit Repair Companies Provide
Many credit repair companies offer additional services beyond processing disputes. These additional services may include:
- Identity theft protection
- Free credit scores
- Credit monitoring
- Personal finance coaching
- Credit education resources
- Inquiry disputes
- Cease and desist letters
These services may be offered for free, or they might require an add-on fee or an upgraded subscription.
When Should You Hire a Credit Repair Company?
So, you have bad credit. How do you know if hiring a credit repair company is the best move for you? Here are a couple of things to consider.
How Much Does Credit Repair Cost?
👉 Across the credit repair industry, the average monthly subscription fee ranges from $50 to $150. So for 6 months worth of services, you’ll pay between $300 and $900.
Cost is a significant factor in determining whether or not hiring a credit repair company is worth it.
Not all credit repair companies charge the same. Some charge a flat fee, while others use a subscription model.
Flat fee charges are usually work-based or performance-based: you pay the company X dollars once they have performed Y services. This is a less popular method for charging customers, and average costs can exceed $100 per completed action.
Companies using subscription-based models will charge you a monthly fee for a set of services. Lexington Law, for instance, charges $99.95/month for their Standard package, $119.95 for their Premier package and $139.95/month for their Plus package. This is the most common system.
There are no guarantees on how long it will take or how much of an improvement you will see.
Depending on the state of your credit, you could end up paying for several months of credit repair services and still see zero results.
You could also see results right away.
With the cost of several months’ worth of credit repair services quickly topping $1000+, you’ll want to carefully consider if the investment is worth the potential improvement to your credit.
A recent court case established that any credit repair company that uses telemarketing to recruit customers cannot bill you until six months after it has demonstrated that it has achieved the promised results. Remember this if you are dealing with a credit repair company that contacted you by phone.
What Does Your Credit Look Like?
If you have a thin credit profile with only a few accounts reporting, and the issues with your credit are limited; then it may not be worth hiring a credit repair company. A small number of minor problems can usually be resolved for free if you tackle the repair yourself.
If your credit history is lengthy, and the issues appearing on your reports are numerous, it may be worth it to invest in a credit repair company’s services.
It is also important to note that not all of the issues that negatively impact your credit can be fixed by a credit repair company. Credit repair companies can offer you useful suggestions but cannot directly help you to:
- Reduce your credit utilization
- Improve your credit mix
- Increase your credit limits
- Open new credit accounts
If your credit is suffering from any of these problems, you’ll need to address this on your own.
☝️ Remember that credit repair can only remove erroneous or flawed accounts, whether you do it yourself or hire a credit repair company.
How Much Time Do You Have to Devote to Credit Repair?
Repairing your credit takes time, especially if you tackle the process yourself.
If you are not prepared or able to invest a significant chunk of your free time into the credit repair process, then perhaps you should consider hiring a credit repair company.
How quickly you need your credit repaired is worth considering as well. If you have a large amount of potentially removable negative information on your credit reports quickly and don’t have the free time yourself, then hiring a credit repair company might be the better option.
Pros & Cons of Hiring a Credit Repair Company
Let’s take a quick look at some of the pros and cons of hiring a credit repair company.
- Someone handles the credit repair process for you.
- Reputable credit repair companies have a track record of success.
- There are specific laws a credit repair company has to adhere to.
- You are dealing with knowledgeable experts.
- Scams run rampant in the credit repair industry.
- It can take a while to hear back on your dispute progress.
- You are leaving the fate of your credit in someone else’s hands.
- Can be expensive.
How to Determine If A Credit Repair Company is Legitimate
The Credit Repair Organizations Act has several stipulations for how credit repair companies can operate. Some of the key features are:
- You cannot be charged a fee until services are performed.
- You must be notified of your rights, including the fact that you can file disputes on your own for free.
- The credit repair company must provide you with a contract.
Some states also have their own more stringent laws governing credit repair companies. This includes attorney requirements, requiring a surety bond, registration requirements, contract limitations, and more.
Georgia takes it one step further and completely outlaws credit repair services.
Even though several laws govern how credit repair companies can operate, there is no shortage of scams out there.
☝️ When evaluating whether or not a credit repair company is legitimate, be on the lookout for the following red flags.
- Requests money upfront
- Makes guarantees or promises
- Asks you to sign away your rights
- Doesn’t inform you of your rights
- Offers to dispute accurate information
- Tells you to falsify information
- Tries to sell you a Credit Profile Number or CPN, telling you that you can use it in place of your Social Security number to apply for new credit.
💡 Tip: If you find a credit repair company running any of these scams, you can report them to the Consumer Financial Protection Bureau.
How to Repair Your Credit Yourself
If the cost of hiring a credit repair company is currently out of reach, there is some good news. You can repair your credit yourself for free. The credit dispute process is designed to be accessible to anyone.
That dispute process that most credit repair companies help you with is a process that you can initiate on your own, directly with the credit bureaus. You can even file disputes online, with no need to type up and mail out lengthy letters.
The upside to tackling credit repair yourself is that you are in charge. There is no waiting around to hear back from the credit repair company or twiddling your thumbs while you wait for them to send out dispute letters.
Alternatives to a DIY Approach
If the do-it-yourself approach to credit repair seems a little daunting, there are other options.
If you want to tackle the process yourself but need a little guidance, purchasing credit repair software might be a solution worth looking at. Credit repair software comes with all the tools you need to file disputes and monitor your credit for a lower monthly price than credit repair services.
Or, if you just need some help understanding credit and how it works, plenty of non-profits offer credit counseling services. These may even be more effective than credit repair, as they focus on addressing the financial habits that cause credit problems in the first place.
When your poor credit results from collections, debt settlement might be a better choice over credit repair. You can negotiate with the collection agencies to reduce your debt, and you can even request the account be deleted from your reports once it is paid (pay for delete).
Should you consider hiring a credit repair company?
Hiring a credit repair company can save you time and hassle, but it will cost you money. It is essential to thoroughly evaluate the services a company offers as well as the current state of your credit to determine if it is worth the cost.
If your bad credit is the result of identity theft, check to see if you currently have any identity theft protection insurance, which is often bundled with other financial services. If you do have this insurance, using it could save you a lot of money.
Repairing your credit doesn’t have to cost anything. If you have the time, you can tackle all the aspects of credit repair yourself for free. You’ll likely gain a greater knowledge of credit in the process.
If you don’t have the time to dedicate to credit repair and need to work on your credit fast, especially if you have a large amount of disputable information on your record, it might be time to consider hiring a credit repair company.
Whichever route you go, just remember, there are no guarantees with credit repair. You may see results right away, or not at all. Negative reports that are accurate will probably not be removed. Credit is complicated, and there is no such thing as a quick fix for repairing credit.