Its commonly known that the better your credit reports and credit scores, the better interest rates and terms youre likely to get from lenders and other service providers. Solid credit reports and scores indicate a lower level of credit risk, which can cause lenders to feel more comfortable offering attractive terms. If you have poor credit, however, lenders are less likely to offer you their most advantageous deals.
Because of this financial reality, people with poor credit seeking ways to improve it may consider hiring a third-party credit repair company. While it may seem like a good idea to pay someone to fix your credit reports, there is nothing a credit repair company can do for you that you cant do yourself for free.
Having a poor credit score can make it difficult to get approved for loans, credit cards and other financial products. Many people with bad credit seek help from credit repair companies that claim they can improve credit scores quickly. But is paying someone to clean up your credit report worthwhile? Here’s what you need to know.
How Credit Repair Companies Work
Credit repair companies offer to review your credit reports from the three major credit bureaus — Equifax, Experian, and TransUnion. They look for negative items they believe they can challenge, such as late payments, charge-offs, collections, bankruptcies, and foreclosures.
The credit repair company disputes these items with the credit bureaus in hopes of getting them removed. If the bureau can’t verify the accuracy of the information within 30-45 days, it must delete the disputed item from your credit report This can potentially boost your credit score.
Many credit repair firms charge an initial fee of $100-$400 followed by monthly fees of $50-$120. Some companies charge per negative item deleted instead of a monthly fee.
Paying Someone vs. DIY Credit Repair
You can dispute errors on your own credit reports for free directly with the credit bureaus. Under the Fair Credit Reporting Act (FCRA), the major credit bureaus must investigate disputed items at no charge.
This means the primary service credit repair companies provide — disputing negative items — is something you can do yourself without paying fees.
However, credit repair companies say their experience filing disputes gives them an advantage. They may have relationships with the credit bureaus and knowledge of dispute strategies that help get more negative items removed.
On the other hand, DIY credit repair allows you to avoid paying credit repair fees that can add up to hundreds or thousands of dollars over time.
Results Vary Widely
All credit repair companies must operate within the confines of the FCRA. This means no company can guarantee it will get negative items removed from your credit reports.
Success depends on the accuracy of the disputed information. If the credit bureau can verify an item is correct per its records, it won’t be deleted.
Outcomes vary widely between credit repair companies. The Federal Trade Commission (FTC) cautions consumers that some companies exaggerate their abilities to improve credit.
Before hiring a company, research reviews carefully to get a sense of actual results clients have experienced.
Alternatives to Paid Credit Repair
Here are some alternatives to hiring a credit repair company:
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Monitor your credit reports. Review your credit reports from each bureau once per year. Look for any errors you can dispute yourself for free.
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Negotiate with creditors. Contact the original creditor to see if they will agree to remove an item, especially if you settle an old debt.
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Wait for negatives to fall off. Most negative information falls off your credit reports after 7 years. As this happens, your credit will slowly improve.
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Focus on credit building. Having a mix of positive information like on-time payments helps offset negatives. Get secured cards and credit builder loans to establish positive payment history.
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Improve financial habits. The most important factor in your credit is making on-time payments going forward. Pay all bills by the due dates.
Who Might Benefit From Credit Repair
Paying for credit repair services likely makes the most sense if:
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You have many complex errors that are time-consuming to dispute yourself.
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You don’t understand dispute and negotiation processes.
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You want to buy a house soon and need fast score improvements.
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You have more money than time and don’t mind paying for convenience.
Even then, make sure to vet any credit repair company thoroughly before signing up. Look for firms with a long history of satisfied clients and proven results.
Don’t Fall for Credit Repair Scams
While some credit repair companies are legitimate, the industry has a history of scams. Avoid any company that:
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Guarantees it can remove all negative information from your reports
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Tells you to dispute correct, negative items
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Advises you to apply for an Employer Identification Number to hide your identity
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Charges fees before providing services
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Asks you to sign a power of attorney giving it control over your finances
These are signs of an unethical or fraudulent credit repair organization. Stick to reputable companies, or better yet, try repairing your own credit for free before paying someone.
Paying someone to clean up your credit report might help in some situations, but it isn’t a magic solution. Credit repair results vary widely, and you may not recoup the fees you pay. For most people, monitoring your own credit reports and disputing errors is a smarter first step.
Focus on improving financial habits going forward, letting negatives slowly age off your reports, and utilizing credit building strategies. With time and diligence, you can repair your credit on your own without risky or expensive credit repair firms.
Do Credit Repair Companies Fix Your Credit?
The words “fix” and “repair” suggest your credit reports are somehow wrong or otherwise contain inaccurate information. This isnt usually true and isnt really how credit repair companies operate. Instead of helping consumers correct possibly inaccurate credit report entries, they attempt to have any negative information removedâwhether the negative information is correct isnt relevant to their efforts.
Credit repair companies cannot fix your credit. They dont have a secret backchannel to the three credit bureaus (Experian, TransUnion and Equifax) that allows them to get information removed. Further, the credit bureaus dont delete credit information simply because youve hired a credit repair company. Theres simply nothing a credit repair company can do for you thats any more effective than what you can do on your own.
How Much Does Credit Repair Cost?
The Credit Repair Organizations Act (CROA) defines a credit repair organization as any for-profit company or person that provides a service, in exchange for payment, that purports to improve your credit reports or credit scores.
Credit repair companies generally charge a subscription fee for work performed during the prior month, or they may charge for each credit report deletion they achieve. The monthly subscription fee generally runs around $75, but it can vary depending on the company and the service you select. They may also charge based on how many items end up being removed from your credit reports. Fees for deleted items also vary, but can be $50 or higher per item, per credit bureau. In either scenario, its easy to see how quickly fees could potentially add up to hundreds or thousands of dollars.
How I REMOVED A COLLECTION from my CREDIT REPORT in 24 HOURS!
FAQ
Can I pay someone to clean up my credit report?
Yes, you can actually pay someone to help you fix your credit. You may be able to do it yourself without paying someone to do it. The first thing to do is to come clean. I can’t stress this enough. I have talked to people trying to fix their credit who still owe money for overdrawing their checking account.
Is it worth paying someone to fix your credit?
If your credit report shows a history of debt problems or contains errors, you may consider using a repair service to “clean it up.” Before you pay, however, know the way these businesses operate. In the vast majority of cases, hiring an outside company will do no more than waste your money.
Can I pay someone to fix my credit with bad credit?
People hire credit repair companies to help them investigate mistakes on their credit reports. But credit repair companies can’t remove negative information that’s accurate and current from your credit report.
Can I pay someone to improve my credit score?
A qualified credit repair company will work within federal laws to protect and improve your credit history and score.Dec 11, 2018