This whole credit thing can feel overwhelming. Just building a credit score in the first place is a mystery to a lot of people. The availability of credit and the opacity of the industry can make keeping your score...
This whole credit thing can feel overwhelming.
Just building a credit score in the first place is a mystery to a lot of people. The availability of credit and the opacity of the industry can make keeping your score intact seem impossible. You might be ready to throw in the towel if you’re stuck with a low credit score you can’t seem to budge.
Credit repair companies come in with flashy ads and over-the-top promises of fixing all these problems for you. The proposition is tempting.
These companies can simplify your life if your credit score is bad because of something complicated like reporting errors, shady debt collection or identity theft.
Regardless of your situation, however, you can always improve your credit without spending any money. And a lot of those flashy ads and over-the-top promises are outright scams.
How Do Credit Repair Services Help?
A credit repair company’s main job is to clean up your credit reports — basically, help you make sure everything showing up in your credit history is accurate.
You might need this if you’ve experienced identity theft or inaccurate reporting that’s left negative marks on your credit report for actions you didn’t take. Credit repair services can:
Spot mistakes or information that can’t be validated. A creditor, collection agency or reporting agency must be able to prove the credit marks in your name are accurate. A credit repair company could help you send a debt verification letter to request that validation. Communicate with companies on your behalf. Requesting validation and asking multiple reporting agencies to update your credit report could be time consuming. A credit repair company can handle the back and forth for you.Credit repair companies can’t guarantee they’ll raise your credit score — that’s never a sure thing. But that is the goal of eliminating errors from your report. Once the bad marks are gone, you should see a boost to your score.
3 Questions to Ask Before Signing up for Credit Repair Services
Before you agree to pay a credit repair company, answer these questions.
1. What Is Hurting Your Credit?
A lot of things can cause bad credit, and a credit repair company can only address a few of them. It can’t help if your credit is hurting because of:
A history of late payments High credit utilization Lack of credit history Recent hard inquiriesAs long as the negative marks on your credit report are accurate — i.e., represent your actual behavior, not fraud or a reporting error — they’re there to stay for seven to 10 years.
Rather than seek credit repair, if you’re overwhelmed by debt or unsure where to begin boosting your score, look into nonprofit credit counseling for free advice.
If inaccurate marks on your report are dragging your score down, a credit repair company can step in and help you dispute them for a fee.
2. Can You DIY Instead?
You can do everything a credit repair company will do for you — you just have to decide whether you want to put in the time. In most cases, it’s not that much.
If your credit is hurting because of any of the factors above, you’re going to have to take it into your own hands and fix your score over time.
If you’re dealing with inaccurate marks on your credit report or debts you don’t think creditors can validate, a credit repair company could take care of the heavy lifting, or you can contact creditors and reporting agencies yourself.
3. Is the Company Reputable?
Once you decide you want to pay for credit repair help, vet companies carefully. You’ll face a lot of scammers trying to pray on desperate debtors.
“You always have to be careful when dealing with a credit repair company,” warns Beverly Harzog, consumer finance analyst and credit card expert at U.S. News & World Report.
Harzog notes two red flags that should send you running:
Promising to remove negative marks, even if they’re accurate. You can’t remove accurate marks from your credit report early. Only inaccurate marks are worth your time and potential money to dispute. Charging upfront fees. The Federal Trade Commission’s Credit Repair Organizations Act forbids credit repair companies from collecting advance payment. Legitimate companies typically only collect a fee if they’re successful in improving your credit report.“Brush up on your rights before you hire one of these companies,” Harzog suggests.
If a company is free of red flags, read some customer reviews to get a sense of whether past customers have found it useful for the types of credit issues you face. Even legitimate companies might simply overpromise or be ineffective for situations like yours.
Should You Pay for Credit Repair?
A credit repair company charges for the same thing any other service company charges for: convenience.
You can handle your credit report and fix your credit on your own if you want to take the time to file disputes and send requests for validation. Unless your report is oddly riddled with errors, this probably won’t take a ton of your time.
If you prefer to spend the time on anything else, feel free to hand over some money for credit repair. Just ask these questions and give it a quick gut check first to make sure you get the service you pay for.
Dana Sitar is a contributor to The Penny Hoarder.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.