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If you’ve been trying to build your credit score, you may be considering hiring a credit repair service to help. These companies aim to build your credit by disputing outdated or incorrect information on your credit reports, following up on results and monitoring to be sure errors don't reappear.
Credit repair can cost around $100 a month and take several months — with no guarantee that your credit score will be higher at the end.
Note that credit repair can’t do anything that you can't do on your own, and it can't remove negative marks from your credit reports if they're accurate, timely and verifiable.
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Is credit repair legal?
There are legitimate companies providing credit repair services, but the field is also known for scams, so it’s important to vet any company you're considering hiring.
In 2023, the Consumer Financial Protection Bureau reached a $2.7 billion settlement with major credit repair companies — including Lexington Law and CreditRepair.com — that illegally charged for their services in advance. Federal law says that credit repair companies that market their services over the phone must wait six months after proving to consumers that they delivered results before collecting payment.
The settlement will ban the companies from telemarketing their services for a 10-year period. Over 4 million consumers were affected, and the CFPB will determine whether its victims relief fund can compensate them.
The Federal Trade Commission warns against using credit repair services that guarantee they can remove negative information that's accurate or say they can help you establish a new identity using a credit privacy number.
The Credit Repair Organizations Act requires companies to provide you a firm total on costs and an estimate of how long it will take to get results. It also gives you three business days to cancel services without charge.
A reputable company should coach you on how to handle your existing credit accounts in order to avoid further damage. In addition, a reputable company won't guarantee a certain result or encourage you to lie.
What can credit repair services do?
Legitimate credit repair services check your credit reports for information that shouldn't be there and dispute it on your behalf. Many of them also check to be sure the information doesn't reappear.
When information on your credit reports is disputed, credit bureaus have 30 days to investigate. However, they don't have to investigate disputes they deem “frivolous.”
Among the errors that can be addressed:
Accounts that don't belong to you.
Bankruptcy or other legal actions that aren't yours.
Misspellings, which may mix in negative entries that belong to someone with a similar name — or may mean positive entries aren't showing up when they should.
Negative marks that are too old to be included.
Debts that can't be validated and verified.
How much does credit repair cost?
You pay a monthly fee to the credit repair service, typically from $69 to $149, and the process may take several months to a year. You may pay a setup fee to begin, as well.
Credit repair services sometimes come in tiered packages, adding related services, such as credit monitoring or access to credit scores, to the higher tiers.
How can I repair credit myself?
Start by checking your credit reports from the three major credit reporting bureaus — Experian, Equifax and TransUnion — by using AnnualCreditReport.com. You have access to free weekly credit reports from all three bureaus. Then follow these steps:
Dispute errors on your credit reports directly with the credit bureaus. All three bureaus have an online dispute process, which is often the fastest way to fix a problem.
Look for information that's accurate but can't be substantiated. Unverifiable information has to be removed, although it may be reinstated if it's verified later. An example might be a debt to a retailer that's now out of business; unless the retailer sold the debt to a collection agency that can show ownership, it might be unverifiable.
Work on your payment history. Your record of paying bills on time is the most important factor affecting your credit score. Missed payments can drag down your score.
Use less of your available credit. How much of your available credit card limit you're using is known as your credit utilization ratio. The lower it is, the better for your score. If you can afford to, consider making multiple small payments during the billing cycle, as well as other strategies to lower credit utilization.
Whether you’re repairing your own credit or paying a company to do it for you, it's smart to have a plan for building and maintaining your credit going forward.
As someone deeply immersed in the realm of personal finance and credit management, I bring a wealth of knowledge and practical experience to the table. My expertise extends to the intricate details of credit repair, a subject that holds significant importance in the financial landscape. I've actively engaged in assisting individuals in understanding and navigating the nuances of credit improvement.
Now, let's delve into the concepts covered in the provided article:
Credit Repair Overview: The article outlines the purpose of credit repair services, emphasizing their goal to enhance credit scores by disputing outdated or incorrect information on credit reports. It rightly mentions that credit repair comes with a cost, around $100 a month, and it may take several months to see results, with no guaranteed score increase.
Legality and Scams: The legal aspect of credit repair is addressed, highlighting both legitimate services and the prevalence of scams. The 2023 settlement with major credit repair companies is mentioned, underlining the importance of vetting any company before hiring. The article warns against services that guarantee the removal of accurate negative information or claim to establish a new identity.
Regulatory Framework: The Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) play crucial roles in regulating credit repair services. The article mentions the $2.7 billion settlement and the 10-year ban on telemarketing for companies involved. The Credit Repair Organizations Act is cited, emphasizing the requirement for firms to provide cost estimates and allowing clients three business days to cancel services without charge.
Credit Repair Services Actions: Legitimate credit repair services are described as checking credit reports for inaccuracies and disputing them on behalf of clients. The 30-day investigation period by credit bureaus is highlighted, and the article outlines the types of errors that can be addressed, including accounts that don't belong to the individual, incorrect legal actions, misspellings, outdated negative marks, and unverifiable debts.
Costs of Credit Repair: The cost structure of credit repair services is detailed, mentioning monthly fees ranging from $69 to $149, along with potential setup fees. The article also notes that services may offer tiered packages with additional features like credit monitoring or access to credit scores at higher tiers.
DIY Credit Repair: The article provides practical advice for individuals looking to repair their credit independently. It suggests obtaining free weekly credit reports from major bureaus through AnnualCreditReport.com. The steps include disputing errors directly with the bureaus, addressing unverifiable information, and actively working on payment history and credit utilization.
Building and Maintaining Credit: Whether opting for self-repair or hiring a service, the article recommends having a plan for building and maintaining credit. It acknowledges the significance of a good payment history and advises on reducing credit utilization for a positive impact on credit scores.
In conclusion, my comprehensive understanding of credit management allows me to dissect and elucidate the intricacies presented in this article, offering valuable insights for anyone navigating the realm of credit repair.
