How Do Credit Repair Services Work?

If you are struggling with bad credit, you might come across credit repair companies that have the ability to clean up your credit report. These businesses often target consumers with less than stellar credit and debt, hoping to acquire your business when you’re unlucky.

While signing up for a credit repair service may seem like an easy solution to your credit problems, these companies charge fees that can put you in further trouble. With just a little research and some free time in your schedule, you might find that you can easily dispute errors on your own at no cost.

Before working with a credit repair company, think about exactly what they offer and at what cost, as well as how you can clean your credit for free.

Credit repair services are not free, but you will not pay a fee until the services are provided. Fees are billed in one of two ways: monthly or per item removed from your credit report.

Monthly subscriptions bill you for services provided in the previous 30 days, while monthly subscriptions only bill you after the information is removed from your credit report. The exact fees vary by service, but they can add up to hundreds or thousands of dollars each year.

Credit repair services are not always reliable or truthful. In fact, the CFPB found that more than half of the people who filed complaints about credit repair companies cited “fraud or scam”.

Fortunately, there are protections for consumers. If you choose to use a credit repair company, you are protected by the Credit Repair Agencies Act (CROA), which regulates the functioning of these companies. Some key points include:

• Consumers have three business days to cancel a contract free of charge.
• Companies cannot guarantee that they can remove information from your credit reports.
• Companies can’t advise you to misrepresent or change your identity to prevent credit bureaus from associating information with you.
• No fees can be charged to consumers for services that have not been fully rendered.

Before signing up for a credit repair service, make sure it follows CROA rules and look for potential red flags, such as up-front payments or results that seem too good to be. true. the CFPB lists other ways to avoid being misled by credit repair companies.

Best of all, dispute any errors on your credit report yourself. There is no charge for cleaning up your credit, and you will avoid misleading businesses that might profit from your poor creditworthiness. Remember that even if you pay to have information removed from your credit report, there is no guarantee that this will increase your credit score.

If you want an inexpensive way to tidy up your credit, here are four steps you can take.

1. Request your credit reports: The first step in cleaning up your credit is to pull your credit reports from the three major credit bureaus – Experian, Equifax, and TransUnion. You can receive Free weekly credit reports from each credit bureau until April 20, 2022 by going to AnnualCreditReport.com.
2. Review your credit reports: After requesting your credit reports, review each one and verify that the information listed is correct. 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 information has sent to a collection agency).
3. Dispute Credit Report Errors: If you find any errors on your credit report, initiate litigation as soon as possible. Check out our step-by-step guide on how to dispute a credit report error.
4. Pay off all debts: Having a balance on your credit card can lead to a drop in your credit score and high interest charges. It is in your best interest to pay off your debts quickly so that your credit can improve. Capital One’s CreditWise® is a free tool that you can use to simulate how paying off your debt will improve your score. Find out how you can pay off your credit card debt.