Do Credit Repair Companies Really Work?
Do Credit Repair Companies Really Work?
Understanding Credit Repair
Credit repair is the process of trying to correct those problems. If the information is accurate, there is little that anyone—even a professional credit repair company—can do to change it. In most cases, it will remain on the credit report for up to seven years, after which it will disappear.
However, if any of the information in a credit report is inaccurate, the consumer has a right to dispute it. They can either do it by themselves or pay someone else to help.
Bear in mind that there is nothing that a credit repair company can do for you that you couldn’t do on your own. 1 But you might consider hiring one if you feel overwhelmed by the process or simply don’t want to devote your time to it.
How Credit Repair Works
The first step in repairing your credit is to obtain your credit reports and check them for accuracy. By law you’re entitled to one free credit report every 12 months from each of the three major national credit bureaus—Equifax, Experian, and TransUnion. The official website for obtaining your free credit reports is AnnualCreditReport.com.
Note that the information in your credit reports can differ from bureau to bureau. That’s because some of your creditors may report to one of them but not to the others.
Once you have your credit reports in hand (or on-screen) review them for errors. If they report late payments, for example, check your records to see if that’s true. Check, too, for any accounts that you don’t recognize. That could be a sign that someone else has opened an account in your name.
In case you discover errors, the Federal Trade Commission (FTC) outlines a dispute process you can follow. 2
The FTC first suggests writing to the credit bureau (or bureaus) in question. Explain which information you’re disputing and attach photocopies of any documents that support your case. You can also contact individual creditors directly to contest information that they supplied to the credit bureau.
The law requires that the credit bureau investigate your claim within 30 days unless it considers it frivolous. The bureau must also provide your letter and supporting documents to the creditor that supplied the disputed information. The creditor is required to investigate your claim and report back to the credit bureau.
When the investigation is finished, the credit bureau must report the results to you in writing. If the bureau decides in your favor, the original creditor must notify all of the credit bureaus it supplied the erroneous information to so they can correct their files. If the decision goes against you, you still have the right to provide a written explanation that will be added to your credit file.
Much of this process can be completed online, and all three of the major credit bureaus provide instructions and the relevant forms on their websites.
Hiring a Credit Repair Company
such as credit monitoring. What’s that likely to cost?
Investopedia recently analyzed a number of such companies to compile its list of the Six Best Credit Repair
Companies of 2021. The companies had a variety of pricing models.
As an example, Ovation Credit Services, Investopedia’s Best Overall pick, offered two plans, which ranged
in price from $79 to $109 per month. Both plans also charged a “first work” fee of $89.
Other credit repair companies charged between $19 and $149 per month, depending on the package of services the consumer signs up for.
If a credit repair company says it can remove any negative information in your credit report, consider that a sign you’re dealing with a scam.
How to Avoid Credit Repair Scams
While legitimate credit repair companies can do what they promise, the field is rife with scam artists. The Consumer Financial Protection Bureau provides some warning signs to watch out for, such as if the company: 3
Promises to remove all negative information from your credit report.
Suggests you dispute even accurate information. Disputing information you know to be correct is tantamount to fraud.
Pressures you to pay upfront. A legitimate credit repair company won’t ask for money before it has done anything. In fact, that’s illegal under the federal Credit Repair Organizations Act.
Note that if you do sign up with a credit repair company, you have the right to cancel free of charge within three days.