If you’re struggling with bad credit, you may stumble upon credit repair companies that boast the ability to clean up your credit report. These companies often target consumers with less-than-stellar credit and debt, hoping to acquire your business when you’re down on your luck.
While signing up for a credit repair service can seem like a simple solution to your credit issues, these companies charge fees that can put you in more of a predicament. With just a little research and time out of your schedule, you may find you can easily dispute errors on your own at no cost.
Before you work with a credit repair company, consider exactly what they offer and at what cost, as well as how you can clean up your credit for free.
What is credit repair?
Credit repair is the process of hiring a company to fix your bad credit through the removal of inaccurate, negative information on your credit reports.
A credit repair company works on your behalf to remove this information by communicating with the credit bureaus (Experian, Equifax and TransUnion) and/or financial companies, like your bank or a debt collector, to dispute the errors.
There can be a lot of back and forth, but the end goal is to have negative information deleted from your credit file so your credit rating improves.
Credit repair companies don't help you manage your money, which is a different service offered by credit counseling companies like the National Federation for Credit Counseling (NFCC) and the Financial Counseling Association of America (FCAA).
How much does credit repair cost?
Credit repair services aren’t free, but you won’t incur a fee until services are delivered. Fees are charged in one of two ways: monthly or per item removed from your credit report.
Monthly subscriptions charge you for services provided during the previous 30 days, while the latter only charges you once info is removed from your credit file. The exact fees vary by service, but they can add up to hundreds or thousands of dollars every year.
What to watch out for with credit repair companies
Credit repair services aren’t always reliable or truthful. In fact, the CFPB found that more than half of people who submitted complaints about credit repair companies cited “fraud or scam.”
Thankfully, there are consumer protections. If you opt to use a credit repair company, you’re protected under the Credit Repair Organizations Act (CROA), which regulates how these companies can operate. Some key points include:
- Consumers have three business days to cancel a contract without charge.
- Companies can’t guarantee that they can remove information from your credit reports.
- Companies can’t advise you to make false statements or change your identity to prevent the credit bureaus from associating information with you.
- Consumers can’t be charged any fee for services that haven’t been fully rendered.
Before signing up for any credit repair service, make sure they follow the CROA rules and look out for possible red flags, such as payments being demanded upfront or results that sound too good to be true. The CFPB lists more ways to avoid being misled by credit repair companies.
And better yet, dispute any errors on your credit report on your own. There is no fee to clean up your credit and you’ll avoid misleading companies that may take advantage of your poor credit standing. Remember that even if you pay to have information removed from your credit report, there's no guarantee that it'll boost your credit score.
How to clean up your credit for free
If you want a costless way to tidy up your credit, here are four steps you can follow.
- Request your credit reports: The first step in cleaning up your credit is to pull your credit reports from the main three credit bureaus — Experian, Equifax and TransUnion. You can receive weekly free credit reports from each credit bureau now through April 20, 2022 by going to AnnualCreditReport.com.
- Review your credit reports: After you request your credit reports, look through each one and verify that the information listed is accurate. Check for discrepancies with your personal information (like name and address), account information (like balances, credit limit, payment history) and bankruptcy and collection data (if your info was sent to a collection agency).
- Dispute credit report errors: If you find any errors on your credit report, start a dispute as soon as possible. Check out our step-by-step guide on how to dispute a credit report error.
- Pay off any debts: Carrying a balance on your credit card can result in a lower credit score and high interest charges. It’s in your best interest to pay off debt quickly so your credit can improve. CreditWise® from Capital One is a free tool you can use to simulate how paying off debt will better your score. Learn how you can pay off credit card debt.
Don’t miss:
- The 6 best credit monitoring services of 2020
- Here’s what information appears on your credit report
- What to look for when you review your credit report
- Constantly checking your credit score? Here’s how often it updates
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
FAQs
The bottom line. There are legitimate credit repair companies that comply with CROA standards. That said, no company can legally do anything you couldn't do yourself for free. Filing disputes with the credit bureaus and exercising good credit habits are the best ways to repair your credit.
How can you dispute an error on your credit report? ›
If you discover errors on your credit report, gather any supporting documents and include them with a letter disputing the error. Then send it to: The credit reporting agency whose report you are disputing. The company that provided the incorrect information.
What is a credit repair dispute? ›
Credit repair companies offer to “fix your credit” by removing negative items from your credit report. They offer to file disputes on negative items on your behalf with the credit bureaus and get them removed.
How much does it cost to dispute an error on your credit report? ›
Both the credit bureau and the business that supplied the information to a credit bureau have to correct information that's wrong or incomplete in your report. And they have to do it for free.
What is illegal credit repair? ›
To understand what legal credit repair is, you need to understand illegal credit repair. Illegal: Altering your social security to improve your credit rating. Report to the authorities any credit repair company that encourages you to change your social security number or acquire a new security number under your name.
Is credit repair a waste of money? ›
If your credit report shows a history of debt problems or contains errors, you may consider using a repair service to “clean it up.” Before you pay, however, know the way these businesses operate. In the vast majority of cases, hiring an outside company will do no more than waste your money.
What is a 623 dispute letter? ›
4) 623 credit dispute letter
A business uses a 623 credit dispute letter when all other attempts to remove dispute information have failed. It refers to Section 623 of the Fair Credit Reporting Act and contacts the data furnisher to prove that a debt belongs to the company.
What is the compensation for error on credit report? ›
You may be eligible to bring a claim for data breach compensation for credit score errors where the error or problem on a credit file is caused by just that; an error. It could be that a lender has placed a late or missed payment fee mark on your account by mistake.
Can you trust credit repair companies? ›
“Credit repair” companies claiming to erase credit problems, remove situations like bankruptcies from your credit reports, or create a new credit identity for you may not be legitimate. You may wind up losing time and money, and it may even have legal consequences.
Is it worth paying someone to fix your credit? ›
Credit repair can cost around $100 a month and take several months — with no guarantee that your credit score will be higher at the end. Note that credit repair can't do anything that you can't do on your own, and it can't remove negative marks from your credit reports if they're accurate, timely and verifiable.
Errors on your credit reports can cause your credit scores to be lower than they should be, which can affect your chances of getting a loan or credit card and how much interest you pay. Disputing credit report errors and getting those negative items removed can be a quick route to a better score.
Can you sue for incorrect credit reporting? ›
You have the right to bring a lawsuit.
Credit reporting companies that break the law can be held liable for damages and attorney fees. In the case of a willful failure to comply with the law, the company can be liable for actual or statutory damages and punitive damages.
What should you do if you find an inaccuracy on your credit report? ›
If you identify an error on your credit report, you should start by disputing that information with the credit reporting company (Experian, Equifax, and/or Transunion). You should explain in writing what you think is wrong, why, and include copies of documents that support your dispute.
What is the best reason to put when disputing a collection? ›
Normally, collections are disputed because the debtor believes they are incorrect for some reason. For example, if you review a copy of your credit report and you see a collection account that you believe belongs to another person, has an incorrect balance or is greater than seven years old, you can file a dispute.
Is a credit repair business risky? ›
News: Beware Credit Repair Companies. In the quest for a better credit score, many turn to credit repair companies, enticed by their promises to fix credit issues. However, beneath the surface, these companies often harbor risks that can leave consumers in a worse financial position.
Can you pay someone to fix your credit score? ›
You can choose to do your own credit repair or hire a company to do it for you. Keep in mind that credit repair firms can't legally do anything for you that you can't do for yourself.
How can I avoid becoming a victim of credit repair scams? ›
Protect yourself
Look out for these red flags in credit repair companies to avoid getting scammed: Charges steep upfront fees. Promises to help consumers reach a specific credit score in a set timeline. Fails to mention you can dispute credit report errors at no charge.
