Credit repair companies help consumers remove inaccurate and outdated information that might harm their credit by negotiating with credit bureaus on their behalf. You can also take steps to repair your credit yourself by disputing inaccurate entries with the credit bureaus.
What Is Credit Repair?
Credit repair is the process of investigating and correcting any mistakes appearing on your credit report. If you have a low credit score and suspect that your file might contain mistakes or outdated information, credit repair might help you boost your score.
Having a poor credit score can negatively affect your personal finances in many ways. Bad credit can make it harder to buy a house, rent an apartment or get approved for a credit card or loan. For this reason, many consumers attempt to repair their credit and improve their credit score.
Typically, individuals hire a credit repair company or credit counselor to conduct the investigation and inform the major credit bureaus — Equifax, Experian and TransUnion — of any mistakes they uncover, but there are some steps consumers can take independently of these companies to repair their credit.
How To Repair Your Credit
If you choose not to hire a credit repair company to help you, it is possible to repair your credit on your own. First, you’ll need a copy of your credit reports from the different credit bureaus. Thanks to the federal Fair and Accurate Credit Transactions Act (FACTA), you’re entitled to request one free credit report from each of the three bureau major credit bureaus every year.
Review the reports from each bureau and look for any inaccurate or outdated information that might hurt your credit score. If you notice any of these inaccuracies, the next step is to file a dispute with the credit bureau that furnished the inaccurate information.
You’ll also need to reach out to the business that provided the incorrect information to the bureau, like your landlord, bank or insurance company. For more information on credit disputes, check out this guide from the Consumer Financial Protection Bureau which also contains a template for dispute letters.
Once you send the dispute, the credit bureaus have 30 days to investigate and verify that the information being disputed is inaccurate. During this time, the bureaus might remove the negative, inaccurate items from your file, causing your credit score to go up.
However, this removal is sometimes temporary. If the bureau’s investigation finds that the disputed entries are accurate, those items will go back on the report.
What Can Credit Repair Services Do?
Credit repair services do the work of combing through your credit reports and disputing inaccuracies on your behalf. A credit repair company will obtain copies of your credit reports from each of the major credit reporting agencies, then look for negative and inaccurate entries on the reports.
The company will focus on finding information such as bankruptcies, tax liens and similar entries that could negatively affect your credit score. If the information is inaccurate or outdated, the company will begin disputing those errors with the credit bureaus and negotiating to have the negative items permanently removed from your credit reports.
From there, the process is in the hands of the credit bureaus. Once the bureaus’ investigations are complete, your credit score may improve — although improvement is not guaranteed. An improved credit score is also not permanent. If you miss payments or file for bankruptcy in the future, your credit score can drop quickly and wipe out the benefits of credit repair.
Beware of any credit repair services that claim they can remove all negative information from your report. If the information is accurate and timely, there is no way to remove it from your report and businesses that claim to do so are probably scams.
Here are some other red flags to watch out for when choosing a credit repair company.
- Asking For Payment Upfront
- Under the Credit Repair Organizations Act, a credit repair company may not require payment until they complete the services they have promised to render.
- Suggesting You Create a “New” Credit Identity
- A scam company might advise you to apply for an Employer Identification Number to use instead of your Social Security number on future credit applications. No legitimate business would ask you to do this, as it is illegal to misrepresent your Social Security number or lie on a loan or credit application.
- Promising Guaranteed Results
- Given that the final decision to remove negative credit report entries lies with the credit bureaus, a repair service cannot guarantee that your credit score will improve because of their services.
Is It Worth Paying for Credit Repair?
The services a credit repair company can legally provide are things you can do by yourself for little or no cost. For this reason, many people opt to dispute credit report inaccuracies themselves.
If the information in your credit report is all accurate and timely, there isn’t much a credit repair company can do for you. In this scenario, only time and a demonstrated record of consistently paying off debts will help to improve your credit score.
However, some people do benefit from the services of legitimate credit repair companies. These are companies with the experience and knowledge to properly resolve disputes with credit bureaus. You may be more likely to have disputes approved and mistakes corrected if you have a professional build your case and negotiate on your behalf.
Credit Repair Companies
Finding a good credit repair company can be challenging, as there are many unscrupulous businesses that make promises they cannot fulfill. Before you reach out to a company for help, take a look at their online reviews on third-party review sites like Trustpilot or the Better Business Bureau.
|The Credit Pros||$69 to $149|
|CreditRepair.com||$69.95 to $119.95|
|Lexington Law||$95.95 to $139.95|
|Ovation Credit Services||$79 to $109|
Frequently Asked Questions
12 Cited Research Articles
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- Consumer Financial Protection Bureau. (2019, October 19). How Do I Dispute an Error on My Credit Report? Retrieved from https://www.consumerfinance.gov/ask-cfpb/how-do-i-dispute-an-error-on-my-credit-report-en-314/
- CreditRepair.com. (n.d.). How We Work To Repair Your Credit Score. Retrieved from https://www.creditrepair.com/how-credit-repair-works
- Ejad, S. (2021, June 10). A Broken System: How the Credit Reporting System Fails Consumers and What To Do About It. Retrieved from https://advocacy.consumerreports.org/wp-content/uploads/2021/06/A-Broken-System-How-the-Credit-Reporting-System-Fails-Consumers-and-What-to-Do-About-It.pdf
- Equifax. (n.d.). Can You Remove Negative Information From Your Credit Reports? Retrieved from https://www.equifax.com/personal/education/credit/report/removing-negative-information-from-credit-report/
- Federal Trade Commission. (2021, December). Understanding Your Credit. Retrieved from https://consumer.ftc.gov/articles/understanding-your-credit
- Federal Trade Commission. (2021, June). Fixing Your Credit FAQs. Retrieved from https://consumer.ftc.gov/articles/fixing-your-credit-faqs#repair
- Lexington Law. (2022, January 14). Credit Repair Companies: How Do They Help? Retrieved from https://www.lexingtonlaw.com/education/credit-repair-companies
- Lexington Law. (n.d.). Trusted Attorneys Helping To Fix Your Credit. Retrieved from https://www.lexingtonlaw.com
- Michigan Department of Attorney General. (n.d.). Credit Repair Scams and Choosing a Credit Counselor. Retrieved from https://www.michigan.gov/ag/consumer-protection/consumer-alerts/consumer-alerts/credit/credit-repair-scams-and-choosing-a-credit-counselor
- Ovation Credit Repair Services. (n.d.). Ovation Credit Repair Services. Retrieved from https://ovationcredit.com/credit-repair/
- Take Charge America. (n.d.). What Happens During the Credit Repair Process. Retrieved from https://www.takechargeamerica.org/what-happens-during-the-credit-repair-process/
- The Credit Pros. (n.d.). Services. Retrieved from https://thecreditpros.com/services/