Is Credit Repair Really Worth the Cost?

Credit repair is a service that helps you correct errors on your credit report. This could include deleting negative items like delinquencies, collections, and even bankruptcies that are accurate but have hurt your credit score for years. It also means updating negative items to show that you’ve paid them off or otherwise dealt with them — for example, paying off a charged-off account will update your credit report to say “paid” instead of “charged-off.” This will help future lenders see that you have been responsible in handling your financial obligations.

Many credit repair companies also offer services to help you improve your credit going forward, such as advising you on budgeting and money management strategies. They may also provide debt counseling or help you establish a repayment plan for your outstanding debt. Some of these services are free, while others charge a fee for their services.

There are plenty of reputable credit repair services out there, but you should research the ones you’re considering. Check out their websites to see what they offer and how much they charge. Pay particular attention to how many monthly disputes a company will send on your behalf. If they cap the number of disputes per month, it will take longer to get things cleaned up compared with a credit repair company that offers unlimited monthly disputes.

You should also be cautious of companies that promise results that are too good to be true or that require up-front payment. These are often red flags for scams, such as a company that demands you use an Employer Identification Number (EIN) or a Credit Profile Number (CPN) in place of your Social Security Number (SSN) when applying for credit, which is illegal.

A reputable credit repair service will work with the credit bureaus to validate the information on your reports and remove inaccurate items, but they won’t be able to fix every mistake. Some negative items, such as bankruptcy or late payments, are accurate and will remain on your credit report for 7-10 years. A good credit repair service will explain the reasons why these items are on your report and offer advice on how to rebuild your credit in the future.

The bottom line: If you’re trying to qualify for a mortgage, auto loan or personal loan in the near future, credit repair might be worth the cost. But you can also clean up your own credit by disputing incorrect information yourself.

What’s the best way to fix your credit?

Before hiring a credit repair agency, you should obtain your credit reports from each of the three major credit reporting agencies, Experian(r), Equifax(r) and TransUnion(r). Then review them carefully for mistakes. You can file a dispute with each credit bureau if you find an error. The credit bureau is required to investigate your dispute and notify you of the results within 30 days unless it’s deemed frivolous. This process will probably take much longer than if you hired a credit repair agency, but it’s still worth the effort if it helps you qualify for financing at lower interest rates.