Can credit repair companies really fix your credit? Some make empty promises, but others offer legitimate help.

Are Credit Repair Companies Worth It? Know When You Need Help (or Not) - credit repair company

Are Credit Repair Companies Worth It? How to Know When You Need Help

You know it’s tough walking around with poor credit. And credit repair companies know your pain, too. That’s why you’ll spot signs screaming “Repair Bad Credit — $299!” in low-income neighborhoods.

 

All credit repair companies claim that they work to remove negative items from your credit report. In other words, they’ll take out anything that counts “against” your credit score including late payments, credit inquiries, collections items, and bankruptcy.

 

What negative items are hurting your credit score? You can check your credit report for free on AnnualCreditReport.com. You can also analyze your credit score by using free sites like Credit Sesame or Credit Karma.

 

TAKE ACTION

Struggling to improve your credit score? Do your research and find a credit repair company that suits your needs.

 

How to Spot a Credit-Repair Scam

If every credit repair company claims to remove negative items from your credit report, how can you spot a scam? The difference comes in how scammers remove that information from your credit report.

 

Scammers will dispute every bit of negative information on your credit report at once. They flood the credit reporting agencies with requests to investigate your credit. The credit reporting agencies then temporarily remove the negative information while they investigate.

 

Unfortunately, this “fix” doesn’t work in the long-term. All the negative information will return to your report after a few weeks. By that time, your credit repair company will have your money, and you’ll still have bad credit.

 

These red flags indicate that a credit repair company is a scam:

 

  • The company recommends that you don’t contact any credit reporting agencies.
  • It guarantees that it can remove accurate negative credit information.
  • It plans to dispute all information in your credit report.
  • It promises to help you “create a new credit identity.”

 

On the other hand, legitimate credit repair companies focus on removing information that is false, unfair, or misleading.

 

A representative from a good credit repair company will work with you and for you.Click To Tweet

 

You should expect the company to create an individualized plan. During an initial consultation, the company will explain how it plans to fix your credit. The plan typically involves sending dispute letters to the credit bureaus or creditors.

 

DIY Credit Repair

Although there are legitimate credit repair companies out there, most people can do a better job repairing credit on their own. Why? You can proactively manage your credit.

 

Take steps to build positive credit that can drown out a negative credit history. The following two actions will help you repair your credit score:

 

 

These tasks aren’t sexy, but they’re effective.

 

Debt Collections

Even if you have debt in collections, your top priority should still pay your bills on-time and work on eliminating credit card debt. Once an account is in collections, the damage is done. Settling debt in collections will not improve your credit score. In fact, even damage from unpaid collections item will start to fade over time.

 

If collections agents are breathing down your neck, the Consumer Financial Protection Bureau gives the tools and resources you need to assert your right to live without being harassed. By asserting your rights, you give yourself the time to put your financial house in order.

 

Once you’re ready to deal with collections agents, you can negotiate a settlement offer. Since collections agencies buy your debt for pennies on the dollar, you can usually resolve your debt for 20 to 30 percent of the outstanding balance.

 

When dealing with a collections agency, get any offers in writing before you send them money.Click To Tweet

 

You’ll also want to send your payment via certified mail. Don’t sign up for electronic payments, and don’t write a personal check. Instead, use a money order or a certified check to pay collections agents.

 

Removing Errors

In a few cases you may also need to remove errors from your credit report. Detecting and disputing errors is more complex, but this guide offers step-by-step instructions.

 

When Are Credit Repair Companies Worth It?

CentSai Buyers Guide - Credit RepairWhile it isn’t absolutely necessary to hire a credit repair company, you may want to in some cases. For example, victims of identity theft may want to pay a company to deal with the complex issues for them. That said, you can still do this on your own. IdentityTheft.gov offers a step-by-step guide on resolving identity theft issues. However, you may prefer to outsource the task to a credit repair company.

 

You may also want to hire a credit repair company if you have complicated reporting errors. When collections agents buy and sell your debt, they update records on your credit report. Changes to the data can lead to duplicate entries or other reporting problems.

 

If you choose to hire a credit repair company, you should use a reputable one with an “A” rating from the Better Business Bureau. Here are four recommendations:

 

Credit Repair CompanyBBB RatingInitial CostMonthly Cost
Sky Blue CreditA+$59$59
Credit Saint Credit RestorationA+$99 – $195$49.99 – $99.99
The Credit ProsA+$179$50 per deletion or $75 for public records removal.
Credit Solution Experts, Inc.A+$250 (credit coaching and audit. Includes budgeting and credit-repair advice)Pay for deletion ranges from $10 to $250, depending on the level of difficulty.

 

TAKE ACTION

Read more about these and other credit repair companies here.

 

For more from Author Hannah Rounds, click here

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