Maybe you just wanted something simple, like a pair of shoes or a new phone. Or maybe something unexpected happened like you got sick or the company you work for shut down.
Either way, before you know it, you’ve maxed out your funds and made late payments on your credit cards, bills and loans. And with that, your credit score diminishes.
Over 35% of Americans have poor credit. If you are one of those Americans, it will be a struggle to get approved for a credit card, mortgage or car loan. Because of the need to improve credit scores, credit repair companies have been increasing in popularity. They promise to raise your credit score but with a fee.
Here is an in-depth explanation of what credit repair is so you can decide if it is the right choice for you.
What Is Credit Repair?
Credit repair brings new life to poor credit. When your credit score deteriorates for whatever reason, credit repair works to get your credit back in good standing.
A credit repair company will help to repair the damage that has been done.
To start, they pull your credit report, examine it, and come up with a game plan that will bring your credit score back to life. That game plan involves reviewing and addressing any negative items on your credit report. They repair your credit score by disputing any incorrect items.
Good credit repair companies will also empower you to make informed financial decisions for your future. They educate you to learn to deal with fundamental financial issues, like budgeting and addressing legitimate concerns on the part of lenders.
Unfortunately, anyone can set up a credit repair business online so they definitely aren’t created equal. It is critical to do your due diligence to find a trustworthy credit repair service.
Working with a legitimate credit repair service is useful because repairing your credit can require financial expertise. Trying to do it on your own isn’t always practical, and you can sometimes end up doing more harm than good.
What Items Can Be Disputed on Your Credit Report?
The main purpose of a credit repair company is to dispute errors on your credit report. They work directly with the credit bureaus to make sure your report is accurate.
A few items they can dispute include:
Your credit report should only list accurate and timely information. It’s not uncommon, though, for mistakes to show up on your report, and some of them could have a big impact on your credit score.
Your credit repair service specialist will read through your credit report to make sure everything on the report is accurate and up to date. If they see an error, they will report it to the credit bureaus.
The most common mistakes that occur are:
- Fraudulent accounts
- Inaccurate balances
- Satisfied accounts that show up as outstanding
- Payments noted as late when you paid on time
- Accounts that were falsely sent to collections
- Incorrect personal ID data
- Inquiries you didn’t make
The credit repair agency will take note of every negative remark on your report, and work with you to see how accurate is.
2. Old Accounts
Let’s say that you have negative accounts on your credit report and the information is accurate. These claims will show up on your report but they shouldn’t be there forever. In almost every case, there is a set time frame of how long it can remain on your credit report.
For example, satisfied judgments can stay on your report for five years after it was filed. For almost everything else, the limit is seven years. That includes items like late payments, charge offs, and chapter 13 bankruptcy.
If your credit repair company notices something that should have been removed from your report because it has aged out, they will work diligently to get it removed.
Obviously, each aspect of your credit report should only be listed once. Although rare, sometimes accounts do get listed multiple times.
This can make it appear that you owe twice as much as you actually do, or that you have more negative marks than you should. This happens most often with student loans because they are sold and re-sold over and over again. Mix ups can happen.
How Long Does It Take To Fix Your Score?
Each situation is different, so there is no way to predict how soon your credit score will go up. At minimum, it will take the amount of time it takes for the businesses or credit bureaus to update your report. After filing a dispute, the agencies have 30 days to respond to your dispute, and nothing can happen until you hear back from them.
Depending on your circumstances, it’s possible to see results within the first 45-60 days. Just keep in mind that there isn’t a credit repair company out there that can promise you a specific outcome. There are several third parties involved, and there is no way to predict how they will all respond.
If you do come across a credit repair agency that promises you a specific outcome, it’s probably best to keep looking.
What’s the Fair Credit Reporting Act?
The Fair Credit Reporting Act is what makes this all possible. It’s a law that was passed in 1970 that addresses the fairness, accuracy, and privacy of the personal information contained in the files of the credit reporting agencies.
The rules of the Fair Credit Reporting Act include how a consumer’s credit information is obtained, how long it’s kept, and how it’s shared with others. The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) are the federal agencies in charge of overseeing and enforcing the provisions of the act.
Without the Fair Credit Reporting Act, it would be much harder to find out what’s on your credit report, making it much harder to repair your credit.
How To Find A Credit Repair Company That’s Right For You
There are several things to keep in mind when you look for a good credit repair company. As we mentioned earlier, if you’re talking to a credit repair company and they promise you a particular outcome, run the other way. They also shouldn’t promise a “simple” or “quick” fix either. Raising your credit score is neither.
You can also see if any complaints have been filed against them by using the Consumer Complaint Database. If you want to you can dig a little deeper. Check with the attorney general and corporate commission offices in your state as well as in the state where the company is headquartered. You check reviews before you go to a new restaurant so the same principle should apply when searching for a credit repair company.
Be aware of shady practices. If they ask you to lie so they can get something legitimate off of your report, they are asking you to break the law. Cut ties with that company right away.
A good company will have a clean record and offer a free consultation before working with you. They will adhere to all local and federal laws, and will never ask you to break the law to raise your credit score.
If you’re looking for a good place to start your search, we recommend The Credit People. Since being founded in 2001, they have been featured in The Wall Street Journal, Smart Money, and USA Today and have helped over 100,000 people raise their credit scores.
How Do The Credit Repair Companies Make Money?
This part can get confusing, because there are a couple different ways credit repair companies make their money, with the most common being:
- Flat fee
Most online credit repair services are subscription-based, and their monthly fees typically range between $50-100.
Flat fee companies have a credit counselor that will assess your overall situation upfront and then set a fixed price to complete the work. These companies get paid the same, whether it takes 5 months or 15 months to fix your credit. With a flat fee, you know what you’ll be paying before you ever get started.
Can You Repair Your Own Credit?
Yes. It’s possible to do all of this on your own. You would have to do everything the repair company would do, by yourself.
You can see where you stand by getting your credit report from www.annualcreditreport.com. Then you analyze your report by yourself. After that, you dispute any errors you find and work quickly to fix them.
Then you commit to doing things like paying your bills on time, avoiding adding to your debt, and pay down your credit card balances every month.
DIY vs. Credit Repair Companies
The major benefit of taking on repairing your credit on your own is the cost savings. However, the disadvantage is the amount of time and effort it takes for you to learn and execute it.
Credit repair companies are specialized in disputing errors on your credit report. They know where and what to look for. If you are in a time crunch and have extra funds to contribute to repairing your credit, it is worth it to work with a reputable company. That way you know it will be done efficiently and correctly.
If you ever want to buy a house or a car, or lower the interest rates on your credit cards, you need good credit. With a less than stellar credit score, consider looking into a credit repair company.
With a dependable and trustworthy credit repair company, you can increase your credit score relatively quickly. And yes, you can do it on your own, but credit repair companies provide convenience and specialization. They will be able to fix your score much quicker than if you did it by yourself.
The key is to find a reputable company to help you out. Thecreditpeople.com, with almost 20 years of experience and over 100,000 satisfied customers, is exactly the type of company you would want to work with.
The Credit People have spent years perfecting their service and improving their performance and customer satisfaction. Everything they do is focused on providing excellent value and unmatched benefits to you, such as:
- Some of the lowest fees in the industry
- Free credit reports and scores
- 24hr account access
- Unbeatable Satisfaction Guarantee®
If you’re ready to buy that house or car, or you need to recover from some questionable purchases, consider getting a free consultation from a credit repair company like The Credit People.