Building credit is a long-term journey that can be very rewarding. People with higher credit scores tend to save more money on loans and other financial products than people with lower credit scores. A higher credit score can open many doors, but embarking on the journey alone can be challenging. That’s where credit repair services can help.
Some consumers use credit repair services to help with rebuilding credit. These services do not compensate for late payments, but they can find errors on your credit report and negotiate on your behalf. This complete guide will cover everything you need to know about credit repair so you can determine if it is right for you.
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Learn about AI-enabled credit repair solutions offered by The Credit Pros and how schedule a free consultation to improve your scores.
What is Credit Repair?
Credit repair is the process of working with a service to repair your credit. The credit repair service does its best to repair your credit, but it can only use the resources available on your credit report. If you continue to make late payments and let debt accumulate, a credit repair agency will not be able to offer as much help.
What Hurts Your Credit and Why Your Credit Matters
Knowing what hurts your credit can make you less reliant on credit repair agencies over the long term. It’s ideal to use a credit repair service for a short amount of time and then build up a good or great credit score on your own. If you can maintain a high credit score, you will not need a credit repair service in the long run.
Your credit score consists of five core components. It’s important to understand how these components work before exploring what hurts your credit.
- Payment history: If you pay your bills on time, your credit score will go up. Payment history makes up 35% of your FICO score.
- Credit utilization ratio: Borrowing a lower percentage of your credit limit will increase your score. This percentage is known as the credit utilization ratio. While a 30% credit utilization ratio is good, a utilization ratio below 10% is ideal. If you have a $10,000 credit limit and borrow $1,000 against it, you have a 10% credit utilization ratio. Credit utilization makes up 30% of your FICO credit score.
- Length of credit history: Older credit accounts demonstrate more experience and can raise your credit score. That’s why it is a good idea to keep your old credit cards open. Credit age makes up 15% of your credit history.
- Credit mix: Having various types of financial obligations demonstrates your ability to juggle multiple commitments. Credit mix makes up 10% of your credit score.
- New credit: Applying for new credit can result in hard credit inquiries. These hard credit checks can hurt your score in the short run, but it’s possible to recover within a few months. New credit makes up 10% of your credit score.
These credit scoring categories depend on your ability to make on-time payments, trim your existing debt, keep accounts open, and avoid applying for too much credit. Making late payments and letting debt accumulate will have the worst impact on your credit score. It is harder to recover from those activities than to regain the points you lost from a hard credit check.
While consumers have many ways to preserve and grow their scores, what is the point of doing all of that hard work? It turns out your credit score helps you get better loans. You can get a lower interest rate and borrow more money from financial institutions if you have a great credit score. That means more mortgage and auto loan options. You can free up room in your monthly budget to cover other expenses or increase your savings. A low credit score can restrict your ability to tap into those types of perks.
Your credit score can also impact your tenant applications, utility bills, and other expenses. Ultimately, a good credit score can help you save thousands of dollars and access better opportunities in your lifetime.
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Learn about AI-enabled credit repair solutions offered by The Credit Pros and how schedule a free consultation to improve your scores.
How Does Credit Repair Work?
Credit repair involves optimizing your current situation. Credit repair doesn’t wipe away your debt or instantly help you achieve a good credit score. Agencies start by looking at your credit report and alerting the major credit bureaus about any errors that are dragging down your score. The major credit bureaus — Experian, Equifax, and TransUnion — are required to make changes to your credit report if you or a credit repair service bring up any mistakes. If one credit bureau makes the changes, the other two will follow suit.
For some consumers, those changes are enough to get a few extra points. Some consumers get 40 or more extra points on their credit score within a few months of working with a credit repair service. Those extra points can help you qualify for a mortgage, make a lower down payment, or secure lower interest rates. Some credit repair services go the extra mile and negotiate with creditors to remove legitimate items that are hurting your score.
For instance, credit repair services can reach out to creditors and negotiate the removal of some late payments. The credit repair agency can point to your recent efforts to make on-time payments and highlight your new money habits. They build up your case and present it to the credit bureaus. While this is not a guarantee, it can speed up your path to a good credit score. It’s important to give a credit repair agency good talking points for their negotiation that are backed by your actions. Credit repair services have a more difficult time negotiating for consumers who still make late payments and let debt accumulate. Not every company offers this service.
Who Can You Seek Help for Credit Repair?
Several credit repair companies can help consumers rebuild their credit. Speaking with their representatives and comparing plans can help you decide which credit repair service is right for you. Many credit repair agencies offer free consultations so you can learn about improving your credit and how the agency can help.
Any consumer can use a credit repair service, but these services are optimal for people who do not have the best credit scores. These services can help you get better loan terms and lower interest rates. If you are thinking about applying for a mortgage or an auto loan soon, getting a credit repair can help you save money in the long run. These are some of the credit repair companies that make themselves available to consumers who need to rebuild their credit.
Get Credit Help
Learn about AI-enabled credit repair solutions offered by The Credit Pros and how schedule a free consultation to improve your scores.
An Overview of the Credit Repair Organizations Act
There are bound to be scammers and aggressive marketing tactics in any industry. The Credit Repair Organizations Act helped defer aggressive marketing tactics by credit repair agencies and has been around since 1996. It prevents credit repair organizations from making misleading claims and requires credit repair organizations to include affirmative disclosures.
The act ensures consumers can cancel at any time and contracts are in writing. It also prohibits credit repair companies from demanding advance payments. The act protects consumers and can help them feel more confident in the credit repair agencies offering their services.
What Do Credit Repair Services Offer?
Credit repair services can improve your credit score. These companies have several offers that can accelerate your credit recovery.
Credit Consultation
Many credit repair agencies offer a free consultation before you become a member. These consultations do not require any commitment or obligation. You can take the strategies from the representative and improve your credit score on your own.
While these consultations can give you actionable advice, the representative will also explain how credit repair services can act as useful companions along the journey. Some credit repair agencies offer consultations after the initial call for people who become members and use their services.
Review Your Credit Information
Credit repair agencies will take a look at your credit report and look for any mistakes. These errors can be corrected and give you extra points on your score. However, this part of the process will only lead to gains if there are mistakes on your credit report. If your credit report does not have any errors, you won’t get the quick credit score bump. However, credit repair agencies can still help with rebuilding your credit.
Limited Power of Attorney
Credit repair services will request that you agree to a limited power of attorney. This agreement allows a credit repair agency to represent you and contact the major credit bureaus on your behalf. Having a credit repair agency do this for you can save you a lot of time. Some credit repair agencies have helped over one million people improve their credit and know how the process works.
Get Credit Help
Learn about AI-enabled credit repair solutions offered by The Credit Pros and how schedule a free consultation to improve your scores.
Credit Solutions and Recommendations
Once credit repair agencies review your credit information and obtain a limited power of attorney, they can get to work on providing credit solutions. The company will let you know about the solutions and give you recommendations that can enhance your credit score.
Dispute Credit Items
Disputing inaccurate credit items gives credit repair services a quick win that can boost your credit score. Your credit report may have an outdated bill that shows up as unpaid even if you have paid it recently. Credit repair agencies can work on those issues immediately.
Provide Progress Reports
Credit repair agencies give you periodic credit progress reports that let you see your score. You can review these reports and track your improvements over time. These reports can give you inspiration to make on-time payments and let you see where you are.
How to Choose the Best Credit Repair Service?
Consumers can choose from several credit repair services. They all offer the same general service and aim to help you with your FICO score. However, each credit repair service has a different approach and unique value propositions.
Before committing to any credit repair service, you should jump on the free consultation. During this consultation, you can learn more about the credit repair service and how the company’s team can assist with your credit-building journey.
Consumers should also review the features a credit repair service offers. Some of these companies offer insurance policies that protect you from identity theft. Others may provide creditor intervention letters to creditors that can get accurate negative items removed from your credit history. Most credit repair agencies will help you track your score and provide reports that can shed light on strategies to build your FICO score.
While credit repair services have various features, the price can make them seem like a bargain or too expensive for your budget. Comparing credit repair services by their monthly costs and if they have any initiation fees can help you see the value you get with your money.
The price can help you make the most practical decision for your wallet, but you don’t want to pick the cheapest choice if it’s not up to par with the other options. Checking Trustpilot reviews and if the credit repair company is BBB-accredited can give you a gauge of past customers’ experiences.
While these companies will quickly highlight customer success stories, the Better Business Bureau and Trustpilot provide a more accurate picture. Companies cannot sugarcoat these reviews, and you will get the full range of customer experiences. You can read reviews praising the credit repair company and reviews that describe any shortcomings.
Considering these factors can help you decide on the right credit repair services that match your budget and goals. Doing this research can make you feel more confident on your journey to rebuilding your credit score.
Get Credit Help
Learn about AI-enabled credit repair solutions offered by The Credit Pros and how schedule a free consultation to improve your scores.
How Much Does Credit Repair Cost?
The cost of credit repair services varies, but most services will have their lowest plan priced between $49/mo and $99/mo. You may have to make a higher monthly payment to access additional features that can have a better impact on your credit, such as creditor intervention letters and inquiry targeting.
Some credit repair services also require an initial fee on top of the monthly payments. This initial fee can range from $50 to $200, depending on the credit repair company and the plan you select. You don’t have to commit to a credit repair service for multiple years, and it’s best if you can get out of a contract as soon as possible. You can walk away once the credit repair agency disputes errors and you rebuild your credit. It’s typically a temporary monthly expense that will not last for long.
Other Things You Should Know About Credit Repair
Using a credit repair service to gain points on your credit score can work well. However, there are a few details you should know about the industry before committing to a plan.
Credit Repair Takes Time
Credit repair isn’t something that happens automatically. It can take a few months for a credit repair company’s efforts to pay off. You may have to pay hundreds of dollars for your plan’s duration to see a meaningful impact on your credit score. If you need to get a higher credit score within two weeks to get better mortgage terms and rates, you may want to hamper your expectations. Consumers who can wait a few months may get results in time for a big loan application.
Not All Negative Items Can Be Removed
Credit repair services can only remove inaccurate negative items. Legitimate missed payments will stay on your credit report for up to seven years. Some credit repair services will go beyond informing the major credit bureaus about disputes. It’s possible to remove legitimate items by contacting creditors and negotiating with them. Credit repair companies that offer these services must demonstrate that you have done a better job with staying on top of payments and will continue to stay on top of your bills. While credit repair services can perform this service, the results are not guaranteed. Your creditors can all reject the idea of dismissing accurate items that hurt your credit score.
You Need to Provide Proof and Other Documents
Credit repair services will request identification documents, such as your driver’s license, Social Security card, pay stubs, tax returns, and previous bank statements. These companies will also request a copy of your credit report from each of the three major credit bureaus. Gathering these documents helps the credit repair service verify your identity and review your records.
Watch Out for Credit Repair Scams
Although the Credit Repair Organizations Act offers some consumer protections, scammers are still in the industry. It can be a scam if a company guarantees results, asks you to do anything suspicious, fails to explain your legal rights, or requests an up-front payment.
Checking a company’s Better Business Bureau rating and reading through Trustpilot reviews can help you determine whether a credit repair service is legitimate.
The Change Might be Temporary
Credit repair agencies can improve your credit score by filing disputes and correcting mistakes. Some of those changes are permanent and will help you get lower interest rates. However, it is possible for other changes to be temporary and eventually hurt your credit score again.
The results from the dispute determine if the change stays permanent or is only temporary. A credit bureau will remove negative items during the investigation process. However, if the investigation reveals those negative items are legitimate, they will get added back to your credit report. Getting negative items added back to your credit report will negate some of the gains and reduce your score.
Can You Repair Your Credit on Your Own?
You can repair your credit on your own and contact the credit bureaus. You can also negotiate with creditors and see if they can help you. However, these steps take considerable time. You have to comb through your credit reports and look for errors. It’s easy to miss errors in these lengthy documents, but a credit repair professional can go through it for you.
People use credit repair services because they aren’t sure how to proceed on their own or do not have enough time to contact credit bureaus and go through their credit reports. If you want to take a DIY approach and save money during this process, it is entirely possible.
Get Credit Help
Learn about AI-enabled credit repair solutions offered by The Credit Pros and how schedule a free consultation to improve your scores.
Is Credit Repair Really Necessary?
The value you can get from a credit repair service depends on several factors. If all of the items on your credit report are accurate, there isn’t much a credit repair agency can do. However, your report can have errors on it that are hurting your score. Removing them can help you see a quick credit score gain, making applying for loans and other opportunities easier.
Some credit repair companies offer additional features that strengthen their value propositions. ID theft insurance is a valuable resource that some credit repair companies offer as a complementary gift if you stay enrolled in a plan.
However, a credit repair agency won’t make much of a difference for people who let debt accumulate and never make their payments on time. People without good money habits or the desire to pay off debt will have a hard time rebuilding credit.
Consumers with high credit scores may not need credit repair services. While raising your score from 550 to 600 can make a big difference, getting your score from 700 to 750 isn’t as impactful. Once you are in the 700s, you qualify for most types of loans and can get some of the lowest interest rates in the market.
Credit repair is one piece of the puzzle to rebuilding your credit and saving money for financial products. If you commit to the other components of a good credit score while using these services, it can be a good investment. However, consumers shouldn’t expect to get high credit scores if they rely on these services without improving their financial discipline.
