Credit repair companies are for-profit organizations that work with creditors and credit bureaus to have mistakes removed from your credit report. They’re ideal for time-crunched consumers who don’t have time to fix their own credit. And depending on the outcomes, you could improve your credit score significantly and possibly qualify for better financing terms on loan and credit card products.
Here’s what to consider if you’re looking to hire a credit repair company to boost your score and improve your overall credit health.
What are Credit Repair Companies?
Before diving into credit repair companies and how they work, it’s vital to understand what credit repair means. Simply put, it involves taking the necessary steps to improve your credit health by addressing negative items on your credit report with creditors and the credit bureaus. The items must be inaccurate or outdated to have them legally removed.
You have the option to repair your credit on your own, or you can hire a credit repair company to do it for you. As the name suggests, credit repair companies exist to handle the credit repair process from start to finish on behalf of the consumer. Of course, some legwork on your behalf is required to optimize your credit health, but the company generally handles all the paperwork for you.
How Credit Repair Companies Work
When you hire a credit repair company, here’s what you can expect:
- Phase 1: Free Consultation. The credit repair process starts with a free consultation. During the meeting – whether face-to-face, by phone or virtually – the credit repair specialist will explain how the process works and what fees to expect. (Note: Credit repair companies are prohibited from collecting upfront payment for services.)
- Phase 2: Onboarding. If you decide to move forward with hiring the credit repair company, the next step is the client onboarding process. With your permission, the credit repair specialist will access your credit reports from the three major credit bureaus – Experian, TransUnion and Equifax. Next, they will review the contents to determine if errors or outdated information is present and if their services can be of any assistance to you. If so, you’ll need to provide written consent, giving the credit repair company limited power of attorney. This means they are legally allowed to act on your behalf during the credit repair process.
- Phase 2: Credit Challenges. Once you’re onboarded and the written contract is executed, the credit repair process begins. The credit repair company refers back to your credit reports and starts to prepare written disputes for the incorrect or outdated items identified earlier. Disputes are sent to the credit bureaus and creditors. The credit bureaus must launch an investigation and provide a response within 30 days. Otherwise, the items are automatically removed from your credit report.
- Phase 3: Ongoing Updates. Throughout the process, the credit repair company will also monitor your credit reports and scores. Most also provide monthly progress reports to clients to keep them in the loop regarding any changes or updates resulting from the disputes. You can also expect to receive updated credit reports to substantiate the claims made in the internal progress reports generated by the credit repair company.
An Overview of the Credit Repair Organizations Act and Fair Credit Reporting Act
These are two important pieces of legislation to be aware of when using a credit repair company. The Credit Repair Organizations Act prevents credit repair companies from making false or misleading claims about the services they provide to clients. Credit repair companies must also:
- Provide detailed written contracts to clients before services are rendered that include the scope of services, payment terms, timeline to completion, the company’s physical address and guidance on how to cancel services
- Refrain from collecting payment until the first work is complete
- Provide clients with the opportunity to cease credit repair services within three days of signing a written contract without incurring fees or penalties
- Avoid making false promises to give the client a fresh start by creating a new identity
- Not ask the client to waive any of their legal rights
The Fair Credit Reporting Act was enacted into federal law to ensure the accuracy and privacy of credit data found in consumer credit reports. It also dictates how long credit items can remain on your credit report. Under this act, credit reporting agencies are required to:
- Provide consumers with free access to their credit report if they’re denied credit, on welfare, victimized by identity theft or unemployed and actively searching for a new role
- Limit access to credit reports unless there’s a permissible purpose (like an application for credit or background check for employment)
- Let consumers dispute inaccurate and untimely items found on their credit reports
What Do Credit Repair Companies Offer?
Free Consultation
As mentioned above, you’ll get a free consultation before deciding to work with a credit repair company. In fact, it’s required under federal law, and the credit repair company must explain what their services and provide other key details entail before beginning work on your credit file.
Credit Report Review and Assessment
The first work fee is generally used to cover this service. It involves the credit repair specialist pulling your credit reports from the major credit bureaus – Experian, TransUnion and Equifax, with your consent and deciding if you’re a good fit for their services. You can also expect to review your reports as well and notify the credit repair specialist of any items that are incorrect, outdated or that don’t belong to you.
ID Theft Restoration and Insurance
Identity theft protection and restoration services may also be included with your credit repair services. But, again, expect to pay a premium for services if the credit repair company you use offers this form of coverage.
Dispute Credit Items
This is the bread and butter of credit repair companies. Most will offer to dispute incorrect or outdated credit data that could be dragging your score down in exchange for a fee.
Cease and Desist, Debt Validation, and Goodwill Letters
These letters are an integral part of the credit process. Depending on the negative items in your credit report, they could be sent to creditors on your behalf.
Cease and desist letters are used to stop all forms of communication between the creditor and client (with the exception of one final communication informing the client of the next steps). Debt validation letters are used to make the creditor prove the client actually owes the debt. And goodwill letters are a common tactic employed to have accurate late payments removed from credit reports as a courtesy.
Progress and Credit Reports
As mentioned above, most credit repair companies send progress reports and updated credit reports to clients monthly. The fee for this service is usually included in the monthly retainer.
What to Consider When Hiring Credit Repair Companies
Features and Services Offered
Does the credit repair company offer attractive features and services? For example, will they simply challenge negative credit data on your behalf or provide detailed progress reports, credit reports, and identity theft protection?
Fees and Costs
Most companies charge between $20 and $150 monthly for credit repair services. The amount you’ll pay depends on the level of service you choose to receive. You’ll also be assessed a first work fee with some companies to pull your credit reports, review them and compile a plan of action to get the negatives removed.
Turnaround Times
How long is the written agreement? How much time does it take for the average client of the credit repair companies you’re considering to get results? While there are guarantees regarding credit repair timelines, signing on with a company that drags their feet with disputes probably isn’t ideal. You could get results at some point, but probably after spending thousands of dollars on their services.
Compliance with Governmental Regulations
It’s vital that the credit repair company complies with the federal regulations mentioned above. Otherwise, they should be axed from your list of options.
Customer Satisfaction and Reviews
The credit repair company you select should have a good reputation. Some negative reviews are to be expected, but they should outweigh the positive things said about the company.
Red Flags and Other Things You Should Watch For
Unfortunately, not all credit repair companies are reputable. Some engage in deceptive practices to get results or prey on innocent customers in an effort to get a quick buck. Here are some red flags that indicate you’re dealing with a credit repair scam:
- The credit repair company demands you pay for services in full before they are rendered.
- The credit repair company does not explain your rights as a client during the initial consultation.
- The credit repair company provides you with an incomplete written agreement to commence services.
- The credit repair company asks you to waive your rights.
- The credit repair company advises the client to avoid contact with credit reporting agencies.
- The credit repair company makes a promise to sweep your credit report or have all the negative accounts and remarks removed.
- The credit repair company encourages you to apply for an Employer Identification Number (EIN) or provides you with a credit privacy number or someone else’s Social Security number. You’re then asked to apply for credit with your “new-found” identity.
- The credit repair company advises you to dispute every negative item on your credit report, even if it’s accurate and timely.
- The credit repair company tells you to claim you were victimized by identity theft and file a police report to get the negative items removed faster.
If you notice any of these, cease all communication immediately and move on to a legitimate option. You can also report any infractions to the Consumer Financial Protection Bureau (CFPB).
Are Credit Repair Companies Worth It?
Ultimately, it’s up to you to decide if hiring a credit repair company makes sense for your situation. If you can do the legwork on your own, it may not be a bad idea to pass on hiring a credit repair. But if you decide to hire someone to help you out, do your research to ensure you’re dealing with a reputable credit repair company.
The Credit Pros provides various credit-related services, including credit restoration, easy-to-read credit reports, personalized score insights, and free consultations with their credit specialists. They received an A+ rating from the BBB and offer a 100 % 90-day money-back guarantee, showing a commitment to satisfying customers and working for your best interests.
The Credit Pros offers three pricing plans, which are priced affordably and don’t require long-term contracts, ranging from $69 to $149 (with a first work fee), to accommodate different financial needs. This choice provides the possibility of assisting with credit report corrections, increasing credit scores, or establishing credit.
For more information on The Credit Pros and their services, fill out a brief form or call (727) 306-8201, and a specialist will contact you at no charge or obligation.
Frequently Asked Questions
Like credit repair, debt settlement is offered by a for-profit entity. But instead of targeting mistakes on your credit report, debt settlement companies work directly with your lenders and creditors to work out settlement agreements. You could get out of debt faster, but debt settlement will likely tank your credit score and should only be used as a last resort if you’re unable to afford your monthly debt payments.
Credit counseling is provided by non-profits. You’ll be paired with a credit counselor who will review your finances and help you devise a plan of action to get your finances back on track. Expect to create a realistic budget and receive debt management advice. You could also be offered a debt management plan, which is a payment arrangement that shields you from having to deal with pesky debt collectors or racking up late fees on your accounts. Some non-profit organizations charge a fee for counseling services, but others don’t.
There are many factors to consider. However, you should start by confirming the credit repair company is licensed to do business in your state and has a solid reputation. Their fees and timelines should also be comparable to what others are offering.
You can do anything the credit repair companies do on your own. However, that doesn’t necessarily mean it’s best to repair your own credit. It depends on how much time you have to spare and how familiar you are with how credit works and the entire dispute process.
Hiring a credit repair company can be sensible if you have a jam-packed schedule and can afford to pay the monthly fee for services. That said, DIY credit repair is ideal if you have the time to file disputes, are familiar with credit reports and credit scores and understand how to dispute erroneous items on your credit report.
It varies by your credit profile and the number of negative items it contains. Many clients of credit repair companies start to see results in just six months. However, the process could be much sooner or longer for you. If your credit report has very few errors and you can get them resolved sooner than later, the credit repair process will likely be brief.
It’s free to fix your own credit. However, hiring a credit repair company requires an investment. You’ll generally pay a first-work fee to get started, followed by a monthly service fee between $20 and $150.
Not necessarily. Pay all your bills on time, keep your debt utilization rate low and only apply for new credit as needed. Also, don’t close old accounts that are in good standing to preserve your credit age. These are just a few key actions you can take to maintain a solid credit rating after you’ve undergone the credit restoration process.
