Are Credit Repair Companies Worth It?

Credit is such an important aspect of our financial lives. It determines if we can extend our credit limit, it impacts our ability to purchase cars and homes, it qualifies us for better options, and so much more. Despite it being such an integral part of our lives, there’s sometimes little information on how to build (or what can destroy) your credit.

What Is Credit Repair?

A simple mistake could lead to bad credit, which sometimes can feel impossible to fix. It can be years before you can get your credit back up to good standing.

The Fair Credit Reporting Act gives you the right to have an accurate credit report. This means that any discrepancies or inaccuracies have the right to be remediated. In fact, 1 in 4 people have a mistake on their credit report.

This is where credit repair companies come into play. They are organizations that help clients review their credit reports and correct/remove inaccurate items to help improve their credit scores. They have an elevated skill set that could be helpful in solving complex credit issues.

Please note: credit repair companies are not the same as credit counseling agencies. The latter are typically non-profit and offer different services than credit repair companies, primarily focusing on debt and finance management.

How Do Credit Repair Companies Work?

Your credit report will be extradited from the major credit bureaus like Experian and TransUnion and will be analyzed to develop a game plan to fix any discrepancies and fix your score.

Do Credit Repair Companies Help Your Credit Score?

Short answer: yes. It does depend on what kind of credit company you use, and of course, there are no guaranteed results.

As always, it’s imperative to conduct your own due diligence and find the right credit repair company. They’re just like any other company; there are many in the market and you have to figure out if the company is legitimate, if their pricing options match your budget, and how they treat their customers.

Don’t be afraid to dig through reviews, interview the different companies, and really try and find the right company for you. Remember that this isn’t a “one size fits all” situation.

Even within the same company, there could be different kinds of plans/services. Find the one that’s best for your needs.

Tips and Tricks

There are some things that you should keep an eye out for that are red flags:

  • If the rates seem like a steal- things that sound too good to be true may not be true
  • The company won’t disclose pricing or specific questions about services
  • There is information being withheld or there is misinformation. You, as a customer, should be told all your rights.
  • A real credit repair company will not ask you to lie or misrepresent information. Everything done should be 100% legal.
  • Payment is demanded upfront.

You can stay up-to-date with your credit score anytime by using Credit Karma

Know your rights:

Under the federal Credit Repair Organization Act (CROA), credit repair companies cannot make false statements about their services and cannot charge you before all the work is completed. You have the right to know:

  • Your legal rights, and the services they will perform, in a written contract
  • That you have 3 days to cancel with no charge
  • How long it will take to get results
  • The total cost you will be responsible for
  • Any guarantees

How Much Are These Credit Repair Companies?

There are two parts to paying the credit companies. The first is typically an enrollment fee of $89-$150 to get started and then approximately a monthly fee of $100.

By law, a majority of these companies cannot charge you until they finish the work. You’re usually paying for the previous month’s work.

The one loophole to this rule is the enrollment fee, and it’s technically a fee for the company, not work they’ve done already.

You can end your monthly subscription after your credit is repaired, but it’s recommended to extend the membership at least 1-2 months after you’ve gotten your credit to the goal score, just in case. Make sure it’s at a score high enough that you feel comfortable to undertake it on your own.

If you don’t want to deal with the hassles of fixing your own credit, a credit repair company can save you a lot of time and trouble. They know what to look for and can move the process along quicker than if you were to do it yourself.

However, if you wanted to save money, it’s very possible to fix your credit yourself.

How To Do It Yourself

  1. Pull your credit report from a website like Credit Karma.
  2. Review and find all the mistakes. Common mistakes include:
    • Wrong name
    • Having duplicate accounts
    • Having incorrect inquiries
    • Incorrect address
    • Incurring 90 days late vs 30 days late
    • Having a credit account on your account that’s not even yours
  3. Dispute all those problems through the app or the website. Dispute every single bit of inaccurate information, because every single inaccuracy can take a toll on your score.

Note that the credit agencies have to respond in 30 days, or they will have to remove the dispute from your credit, and it won’t come back.

It’s important to remember that most likely, there is no such thing as a “quick fix” when it comes to your credit. You won’t be able to increase your credit score by a hundred points overnight, or even within a month. Improving your credit score will take time, but it’s very worth the effort.

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