Do Credit Repair Companies Even Work and Could DIY Be Better?

Dealing with bad credit can make life challenging. You may not qualify for loans or credit cards or have to pay higher insurance premiums. It may even hurt your chances of getting a job. If your credit report doesn’t accurately reflect your credit history, a credit repair company may help you get it corrected.

While they don’t do anything you can’t do yourself, if you don’t have the time or patience to deal with credit bureaus and creditors, these companies may provide a valuable service.

Before deciding if credit repair companies are right for you, learn how they work, their cost, and how it compares to DIY credit repair.

What is a credit repair company?

The name credit repair company can be somewhat confusing for some people. I know when I first heard about it, I assumed they could work their magic to get negative credit information off your credit report, even if it was legit.

That’s not exactly the case.

While they can get incorrect or negative information removed from your credit report, they can only get information removed that is fraudulent, reported incorrectly, or doesn’t belong to you. For example, if your credit card company reported that you made a payment 35 days late, but you have proof that you made the payment by your due date, a credit repair company may help you dispute the issue.

However, if you knowingly missed your due date and the account went 30+ days late, a credit repair service has nothing to dispute because your “evidence” would show that you made the payment late and the mark on your credit report is warranted.

How do credit repair companies work?

Credit repair companies review your credit history for inaccurate information they can contest. The Fair Credit Reporting Act (FCRA), which is enforced by the Federal Trade Commission (FTC), makes it possible to dispute inaccurate information and have it removed from your credit reports.

Under the FCRA, credit bureaus are required by law to investigate a dispute and inform you of their findings within 30 days, unless the credit bureau deems your claim to be frivolous. If the credit bureau cannot prove the disputed information is correct, they must remove it.

Examples of frivolous claims include:

• Assertions with little or no supporting information
• Multiple claims filed at once without sufficient proof

However, even if a credit bureau declares your dispute frivolous, it must still inform you of its decision within 30 days.

Generally, credit bureaus update the information in their credit reports once a month or within 45 days. If a credit repair company was able to dispute one or more tradelines, you might notice a difference in your credit score.

Although some credit repair services are reputable, others are not. The FTC warns consumers to be wary of credit repair scams and thoroughly vet any company you’re considering hiring.

The credit repair process

Typically, credit repair services begin by requesting copies of your credit report from the three major credit reporting agencies — Equifax, Experian, and TransUnion. The company will usually look for inaccurate information or negative items that could hurt your credit.

Here are some errors often found in credit reports:

• Identity errors
• Inaccurate account information
• Accounts that aren’t yours
• Duplicate accounts
• Balance errors
• Data management errors

After identifying items to dispute, the company will create a plan that involves reaching out to the credit bureaus or the companies that reported the erroneous information to the bureaus. The goal is to get the credit bureaus or the company reporting the credit information to delete the harmful mark or modify it on your behalf.

If the credit repair service successfully removes even one derogatory mark — particularly if that mark is a serious one, such as a repossession or bankruptcy — it could potentially impact your credit. Individuals with high credit scores tend to have no or very few negative marks on their credit reports.

Credit repair company offerings

Many credit repair companies offer packages that include the various services they offer as part of their credit repair process, such as:

• Credit monitoring: The primary purpose of credit monitoring is to alert you of potential fraud before it becomes a problem.
• Credit score tracking: This informs you of changes to your credit score and shows you how your credit has changed over time. It can help you make different or better decisions about how you manage your credit in the future.
• Score analysis: Companies typically provide a breakdown of the factors that are contributing to your credit scores, which could include your payment history, credit utilization ratio, and other variables.
• Creditor interventions: Credit repair companies may offer to send what’s called a “goodwill intervention letter.” This letter aims to appeal to a creditor’s goodwill and ask the mark to be removed because you have an otherwise sterling payment record.

How much does credit repair cost?

According to the Credit Repair Organizations Act (CROA), a credit repair service may not charge an advance fee for services. But how credit repair companies charge for their services and the amounts they charge vary widely.

Here are some of the ways credit repair companies charge customers:

• First work fee: This fee covers the cost to set up and analyze your account. By law, credit repair companies cannot charge this fee until they’ve done work on your account, so you may pay it a few days or a week after they start your account.
• Per-item fee: Some companies charge a fee per item they dispute. If you only have one or two items to dispute, this may be the better option.
• Monthly fees: Most commonly, companies charge a monthly fee for as long as you have a subscription for them to dispute your negative credit information.

To give you an example, one popular credit repair company that we’ve reviewed, Credit Saint, has monthly fees ranging from $79.99 per month to $139.99 per month depending on the services provided plus an initial set up fee that ranges from $99 to $195.

How to find a legitimate credit repair company

If you’re leaning toward outsourcing your credit repair to a third-party company, make sure to investigate its legitimacy before signing an agreement. Start by checking the company’s record of complaints with the Better Business Bureau and the Consumer Financial Protection Bureau. You can also perform a Google query of the company’s name, which often returns reviews by previous customers.

As you perform your due diligence on credit repair companies, the CFPB advises looking out for these five red flags for potential credit repair scams:

1. Requests or demands upfront payments: The Credit Repair Organizations Act prohibits companies from seeking upfront payment. Organizations can request or receive money only after they complete the services they promise.
2. Sounds too good to be true: Credit repair takes time, even when you’re trying to delete false information. Think twice before working with a company that claims it can repair your credit overnight, guarantees results, or promises a specific credit score.
3. Can’t answer questions: Be wary of companies that can’t answer simple questions or provide details about their services. Ask a few questions to get a sense of whether you’re speaking with a legitimate organization.
4. Provides misinformation and isn’t forthcoming: Scam outfits sometimes tell their customers not to contact the credit bureaus because only they can do that. That’s misinformation and a solid indication to walk away. A legit company should also inform you of your legal rights. For example, they should inform you of your right to a written contract containing the details of your arrangement and your right to cancel your contract within three business days.
5. Asks you to misrepresent information: Run, don’t walk, from any company that advises you to create a “new” credit identity to obtain a new credit report.

How to repair your own credit

Everything a credit repair company does, you can do yourself. Here are the simple steps:

1. Pull your free credit reports. You are legally entitled to a free annual credit report from the major credit bureaus — Experian, Equifax, and TransUnion. You can apply to get these reports at AnnualCreditReport.com.
2. Examine your credit reports. Learn how to read a credit report and verify that it contains accurate information. Look for mistakes or inaccuracies with your personal information, account information, and any collections.
3. Dispute incorrect information. Credit repair boils down to challenging incorrect information and removing the errors from your credit report. You can learn the best practices for how this works in our guide on how to dispute credit report errors.

The CFPB provides sample templates to contest errors with the credit bureaus or to file dispute letters with information furnishers, such as creditors and debt collectors.

FAQs

Bottom line

Paying for credit repair could be a waste of money for some people because credit repair companies don’t do anything you can’t do yourself. However, there are some situations where it makes sense, especially if you have a large number of disputes.

If your credit history is accurate, but you wish you had a higher credit score, consider using a credit counseling service. These are typically nonprofit companies that connect you with a credit counselor and provide a free consultation to get you started.

If you need either a credit repair company or credit counseling, now is a good time to learn more about how to manage your money and avoid more credit issues in the future. Best practices for a better credit score include avoiding late payments to any lenders or creditors, keeping your credit balances below 30% of the available credit limit, and being mindful not to rack up too many hard inquiries at once.

Raise Your FICO® Score¹ <p>Credit score calculated based on FICO® Score 8 model. Your lender or insurer may use a different FICO® Score than FICO® Score 8, or another type of credit score altogether. <a href="https://www.experian.com/help/information.html?conf=ecs_ficoScoreDisclosure" target="_blank">Learn more</a>.<br></p> Instantly

Experian Boost Benefits

• Get credit for making on-time payments for your qualifying rent, utility bills, and streaming services² <p>Results will vary. Not all payments are boost-eligible. Some users may not receive an improved score or approval odds. Not all lenders use Experian® credit files, and not all lenders use scores impacted by Experian Boost®. <a href="https://www.experian.com/help/boost-disclosure.html">Learn more</a>.</p>
• 100% free — no credit card required
• New credit scores take effect immediately
• FICO® Score refreshed every 30 days upon sign in and one free personal privacy scan

Sign up for Experian Boost now