A high credit score is vital for a number of reasons, from securing mortgages and auto loans to receiving favorable insurance premiums and rent rates. It’s no wonder that credit repair companies have popped up all over the place, touting their abilities to fix your report and get negative marks removed. However, these services can be costly and often come with hidden fees that can put you in even more of a financial predicament than you were before signing up.
A credit repair company usually charges a fee to review your credit reports, identify errors and dispute them with the credit bureaus. They’ll also negotiate with creditors to have disputed items like late payments, bankruptcy records or tax liens erased from your report. You can do most of this work yourself, though it’ll take some time to research each item, send letters to the credit bureaus and creditors, and follow up on your disputes.
In addition to disputing errors on your report, credit repair companies may help you develop strategies to manage your finances moving forward. This can include budgeting and financial counseling, creating a plan for paying off debt, and helping you monitor your credit report for continued accuracy. They can also help you build a savings account and help you make wiser decisions when it comes to spending money.
What can’t credit repair companies do for you?
Credit repair companies can do a lot of good things for you, but they can’t legally do anything that you can’t already do for yourself. For instance, the Consumer Financial Protection Bureau says that you have a right to request a free copy of your credit report from each of the three major credit reporting agencies, and you can contact the agency directly to request removal of inaccurate information.
The bureaus are required to investigate all disputed items within 30 days, but there’s no guarantee that the negative items will be removed from your report. Furthermore, the CFPB notes that if you’re currently in default on a student loan or other debt, it will likely be impossible to secure better terms or loan approval until those are resolved.
Lastly, the CFPB warns that many credit repair companies misrepresent what they can do for you. This can include promising to obtain a new Employer Identification Number (EIN) or Credit Profile Number (CPN) for you, which would allow you to use that in place of your Social Security Number on future credit applications (it’s illegal to do so). They might also promise to file a sham lawsuit against your creditors to get negative marks removed from your report. Generally, you can sue a credit repair company for violating the Consumer Credit Reporting Act if they fail to provide you with the proper disclosures and contracts. CROA requires that any contract you sign contain all the details of your payments, what services will be provided and how long they’ll last, as well as a physical address for the credit repair company. You’re also entitled to cancel your service without penalty within three business days of signing a contract.