What Is a Credit Repair Service?
A credit repair company is a third-party organization that works on your behalf to get inaccurate information removed from your credit report for a fee. It reviews your credit report for items that can be challenged under the Fair Credit Reporting Act and asks creditors to verify negative marks in order to remove them from your report. While there is nothing illegal about these services, they can be costly and can take up to several years to have a meaningful impact on your credit score. It is possible to do this work yourself, without paying a credit repair company, by disputing incorrect information directly with your credit bureaus and creditors.
Some companies offer additional services, like writing cease and desist letters to debt collectors on your behalf, but these are typically included in higher-tier packages that also come with a monthly charge. Credit repair companies can cost anywhere from a one-time setup fee to hundreds of dollars per month for their services.
In general, a good credit repair company will start with an in-depth review of your credit report to identify any inaccurate information. From there, they will reach out to your credit bureaus and data furnishers to dispute those inaccurate items. The credit reporting agencies will then investigate the claims and notify you of their decision in writing. If the credit bureaus decide that an entry is erroneous, it will be removed from your report. Credit repair companies can also help you to understand your credit report and suggest ways that you can improve your credit score in the future.
It is important to remember that credit repair companies can only remove information from your report that is inaccurate or outdated. They cannot remove legitimate blemishes, such as late payments or bankruptcy, from your credit report. Credit repair companies that claim otherwise are likely scams.
In addition, you should be aware that using a credit repair service will cause a hard inquiry on your credit report, which will temporarily lower your score. This can make it harder to qualify for a loan, or may result in you being charged a higher interest rate. For these reasons, it’s best to use a credit repair service as a last resort.
If you have questions about working with a credit repair company, it is a good idea to contact your local Consumer Financial Protection Bureau for assistance. They can provide you with a list of red flags to watch out for, including companies that demand payment upfront, make promises that sound too good to be true and advise you to misrepresent your identity.
Credit repair is a long process that can take up to several years. It’s important to monitor your credit score as you work on repairing it so that you can see the results of your efforts. The two major credit scoring agencies, FICO and Experian, both offer credit monitoring for a fee that’s far less than what credit repair companies charge.
