Are your credit reports full of inaccurate and harmful information? Has your credit score suffered? If so, you may be wondering if you should hire a credit repair company.
But is it worth the investment? Can the credit repair company even restore your credit?
To help you make the best decision for your situation, let’s take a look at what a credit repair company does, how much they charge, what laws govern the credit repair process, and how you can repair your credit yourself.
What does a credit recovery company do?
Credit repair companies offer a variety of services to help their customers improve their credit scores. These services focus on the litigation process, allowing creditors to challenge inaccurate credit report information
To do this, they will first analyze your creditworthiness to determine where the problems are. They will then discuss with you what services they can provide to solve these problems.
Once you agree to hire the company, they will communicate on your behalf with credit bureaus, collection agencies, creditors, etc. to resolve these issues.
Help you file disputes
The most important service most credit repair companies offer is the filing of disputes. Disputes are a process for removing malicious information from your credit reports.
Malicious information can include fraud, clerical errors, bills that should have been dropped, inaccurate collections, late payments, and more.
The credit repair company will send letters of dispute to each credit bureau on your behalf and follow up on any requests for additional information. It may take several sets of these letters to resolve all issues with your credit reports.
While these companies are only allowed 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.
💡 The most accurate information cannot be removed from your credit report. An exception, albeit without guarantees, are direct debit accounts. Collection agencies may not have the information necessary to verify your debt, especially if it is an old debt that has passed from one collector to another. It’s worth disputing direct debit accounts even if you think they’re correct.
Additional Services Credit repair companies provide:
Many credit repair companies offer additional services in addition to dispute resolution. These additional services may include:
Identity Theft ProtectionFree Credit ScoresCredit ControlsPersonal Financial CoachingCredit Educational ResourcesInvestigation DisputesLetters of Suspension and Cancellation
These services may be offered for free, or they may require a fee or an upgraded subscription.
How to determine if a credit repair company is legit?
The Credit Repair Organizations Act contains a number of provisions on how credit repair companies can operate. Some of the key features are:
You will not be charged until the services are performed. You should be made aware of your rights, including the fact that you can file disputes yourself free of charge. The credit repair company should provide you with a contract.
Some states also have their own stricter laws for credit repair companies. This includes attorney requirements, a bond, registration requirements, contract restrictions and more.
Georgia goes one step further and completely bans credit repair services.
While different laws govern how credit repair companies can operate, there is no shortage of scams out there.
☝️ When evaluating whether a credit repair company is legit, be aware of the following red flags.
Asks for money upfront Makes guarantees or promises Asks you to sign your rights Does not inform you of your rights Offers to dispute accurate information Tells you to falsify information Trying to sell a credit profile number or CPN so that you can know that you can use this instead of your social security number to apply for a new credit.
💡 Tip: If you find a credit repair company that carries out any of these scams, you can report it to the Consumer Financial Protection Bureau.
Advantages and disadvantages of hiring a credit repair company
Let’s look at some of the pros and cons of hiring a credit repair company.
Someone will handle the credit recovery process for you. Reputable credit recovery companies have a track record of success. There are specific laws that a credit recovery company must adhere to. You are dealing with knowledgeable experts.
Scams are rampant in the credit repair industry. It may take a while before you hear about the progress of your dispute. You leave the fate of your credit to someone else. Can be expensive.
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 few things to consider.
How much does credit repair cost?
👉 In the credit repair industry, the average monthly subscription cost ranges from $50 to $150. So for 6 months of services, you’ll pay between $300 and $900.
Cost is an important factor in determining whether 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 fees are usually work or performance-based: you pay the company X dollars once they perform Y services. This is a less popular method of charging customers and the average cost can exceed $100 per action completed.
Companies that use subscription-based models will charge you a monthly fee for a range of services. For example, Lexington Law charges $89.95/month for their basic package and $129.95/month for their premium package. This is the most common system.
There are no guarantees about how long it will last or how much improvement you will see.
Depending on the state of your credit, you may end up paying for several months of credit repair services and still not see any results.
You could also see results right away.
With the cost of several months of credit repair services quickly reaching $1000+, you should carefully consider whether the investment is worth the potential improvement in your creditworthiness.
What does your credit look like?
If you have a thin credit profile with only a few accounts reporting, and your credit issues are limited; then it may not be worth hiring a credit repair company. A small number of minor issues can usually be fixed for free if you tackle the repair yourself.
If your credit history is long and the issues that appear in your reports are numerous, it may be worth investing in the services of a credit repair company.
It’s also important to note that not all issues that negatively affect your credit can be resolved by a credit repair company. Credit recovery companies can provide helpful suggestions, but cannot directly help you to:
If your credit suffers from any of these problems, you need to fix it yourself.
☝️ Remember that credit repair can only remove faulty or faulty accounts, whether you do it yourself or hire a credit repair company.
How much time should you spend on credit recovery?
Repairing your credit takes time, especially if you tackle the process yourself.
You should make time to learn about your creditworthiness and the credit repair process. You need to invest time in filing disputes, typing letters, contacting creditors, etc.
If you are not willing or able to invest a significant amount of your free time in the credit repair process, you may want to consider hiring a credit repair company.
How quickly you need to get your credit repaired is also worth considering. If you quickly have a large amount of potentially removable negative information on your credit reports and don’t have any spare time of your own, hiring a credit repair company may be the better option.
How to restore your credit yourself
If the cost of hiring a credit repair company is currently out of reach, there is good news. You can repair your credit yourself for free. The credit dispute process is designed to be accessible to everyone.
That litigation process most credit repair companies help you with is one you can initiate yourself, directly with the credit bureaus. You can even file disputes online without typing and sending long letters.
The benefit of tackling credit repair yourself is that you are in charge. You don’t have to wait to hear back from the credit repair company or twiddle your thumbs while you wait for them to send out dispute letters.
There are also many free online options to help you out, such as dispute templates, free credit monitoring services, free credit scores, and more.
Alternatives to a DIY Approach
If the DIY 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, buying credit repair software can be a solution worth checking out. Credit repair software comes with all the tools you need to file disputes and monitor your creditworthiness for a lower monthly price than credit repair services.
Or, if you just need some help understanding credit and how it works, numerous nonprofit organizations offer credit advisory services. These can actually be more effective than credit repair because they focus on addressing the financial habits that cause credit problems in the first place.
When your bad credit is the result of collections, debt settlement may be a better choice than credit repair. You can negotiate with the collection agencies to reduce your debt, and you can even request that the account be removed from your reports once it is paid (pay for delete).
Are you considering hiring a credit repair company?
Hiring a credit repair company can save you time and effort, 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 creditworthiness to determine if it is worth the cost.
If your bad credit is due to identity theft, check to see if you currently have identity theft insurance, which is often bundled with other financial services. If you do have this insurance, using it can save you a lot of money.
Repairing your credit does not have to cost anything. If you have the time, you can tackle all aspects of credit recovery yourself for free. You will likely gain more credit knowledge in the process.
If you don’t have time to devote to credit repair and need to work on your credit quickly, especially if you have a large amount of questionable information on file, it may be time to hire a credit repair company.
Whichever route you take, remember that there are no guarantees with credit repair. You may see immediate results, or not at all. Negative reports that are correct are unlikely to be deleted. Credit is complicated and there is no such thing as a quick fix for credit repair.
This post When should you consider hiring a credit repair company?
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