Whether you are shopping for a home or car or trying to qualify for an apartment, you need to have good credit. But bad marks on your credit report can make it difficult or impossible to get financing and could also mean higher interest rates. A credit repair company can help you clean up errors on your credit reports that are hurting your score. It can also assist you in developing strategies to manage your finances better going forward, including helping you create a budget and financial counseling.
Unfortunately, not all credit repair companies are reputable. Some have been known to engage in practices that are illegal under the Consumer Credit Reporting Act and the Fair Debt Collection Practices Act, such as disputing items on your report that are untimely, misleading, incomplete or unverifiable. Others have been accused of fraud, deception and even identity theft in an attempt to steal personal information that is used for fraudulent purposes. Some have even been reported to the Federal Trade Commission (FTC) for these practices.
FTC investigations have found that some credit repair companies overcharge and may not be effective in their services. They often charge monthly fees for their services, but you should always shop around and compare the prices of different credit repair companies before choosing one to work with. You should also pay close attention to the number of monthly disputes the credit repair company will send on your behalf. If a company places a cap on this number, you may end up paying more in the long run than if you choose another credit repair company that offers unlimited monthly disputes.
The amount of debt you carry on your credit reports makes up 30% of your score, so reducing your balances is an important part of credit repair. Some of the steps a credit repair service might take to reduce your debt balances include changing your status from “past due” to “paid” and working with creditors to negotiate lower outstanding debt balances. They might also help you develop a debt repayment plan or assist you in seeking bankruptcy protection if necessary.
While you can dispute inaccurate information on your own without the help of a credit repair company, hiring a firm to do it for you can be less time-consuming and frustrating. However, be wary of credit repair companies that demand payment upfront before doing any work on your behalf. This violates the Consumer Credit Reporting Act and can leave you in a worse position than before you hired them.
The best credit repair services have a proven track record of success and are highly recommended by consumers and financial experts. They will work with you to identify errors in your credit report, prepare challenges to file with the credit bureaus and reach out to the credit reporting agencies or to the company that reported the erroneous information to get the inaccurate mark removed from your credit report.