Last updated on April 24th, 2023
If you have bad credit, hiring a credit repair company in order to fix your credit rating may be your best option for getting your finances back in order. Having negative information in your credit history can have long term effects, such as higher credit card interest rates or disqualifying you for a loan to your dream home. With that in mind, it makes sense to want to reach out to others for help, but you should definitely know what you’re getting yourself into first.
What Is a Credit Repair Company, and What Do They Do?
Credit repair companies are one of many aspects of the credit and credit card industries. Credit repair companies are made up of teams of financially-minded people with the goal of getting negative items removed from your credit history. You pay them to take a deep dive into your credit reports pulled from the three major credit bureaus, Equifax, Experian, and TransUnion, and fight on your behalf to ensure their accuracy.
What items are on your credit report? Typically, all credit reports contain the following information:
- Date of Birth (DOB)
- Social Security Number (SSN)
- Date of account opening
- Credit limits
- Loan amount
- Payment history
- Account balances
Related Article: What Information Is On Your Full Credit Report?
This data is collected from credit card issuers, banks, and other financial entities you’ve interacted with. Repairing your credit takes more than just identifying where items from your credit report came from. As such, a credit repair service also works with you to develop strategies that can increase your credit scores over time. Usually, this means exhibiting responsible financial behavior so that your standing with the three major credit bureaus improves, like paying your bills on time and not opening or closing multiple credit cards at once.
What Do Credit Repair Companies Charge for?
Credit repair companies can charge a wide array of fees, depending on the services they offer. They may charge you for every cease and desist letter they send to debt collectors on your behalf and item deleted from your credit report or collect a monthly fee that covers the cost of professionals analyzing your entire report and speaking with creditors to remove these inaccurate records.
Credit repair software isn’t much cheaper, and often supplements the same guidance you’d receive from credit repair companies with templates for the creditor inquiries and cease and desist letters mentioned above. All that said, there’s no guarantee that the actions carried out by the credit repair company you choose guarantees you’ll have a higher credit score.
Sure, they offer advice and do their best to remove mistakes they find on your credit report, but that only affects the issues they actually find. They’re human, like you and I, and can miss a mistake buried deep in your credit report from decades ago that has been plaguing your prosperity.
Are Credit Repair Services Worth the Cost?
Ultimately, you can do everything that a credit repair company does. You can sift through pages and pages of documents, checking and cross-checking your bank statements and credit reports to make sure they’re all accurate, but you also have to determine if that is the best use of your time. You may very well be able to prepare dinner every night for your family, but it’s also nice to order takeout every once in a while as well.
If you’re not confident in your knowledge about credit repair tactics, credit repair professionals may be the option for you. Healthy skepticism is always a safe approach to take when entrusting others with your sensitive financial information, but regulations have been put into place for your protection.
Thanks to Title IV of the Consumer Credit Protection Act, the 1996 statute known as the Credit Repair Organizations Act (CROA), credit repair companies are required to provide consumers with the knowledge to make decisions regarding their business practices, including providing detailed advertiser disclosures and preventing fraudulent advertising outright. This helps to make sure that credit repair companies are as honest as they claim to be with the things they say they can do for you.
The CROA also protects consumers by only allowing credit repair companies to get paid after their services have been completed, which is particularly important for those who want peace of mind. By taking the time to thoroughly research credit repair companies until you find the one that best meets your specific needs, you’ll be setting yourself up for success and a much easier time with creditors in the future.
Related Article: How Long Does It Take to Repair Your Credit Score?