What are credit repair services – and are they worth the money?
Imperfections on your, including late and missed payments, are no joke. They have a direct impact on your , which can be the deciding factor in determining whether you are approved for a , as well as the amount you will pay for the insurance and . Conclusion: if you have , you must solve them as soon as possible.
But you don’t have to go it alone. There are professional repair services available, and some of them can help resuscitate your credit. We’ve got everything you need to know about what a credit repair service can and can’t do, and what to look out for when choosing one.
What do credit repair services do?
The first step is— helping you understand and analyze your credit score. (A 2018 survey by the American Institute of CPAs found that a third of Americans never check their credit report.) If your score is low, a credit repair service will explain why and provide advice. tactics on how to improve it.
The second function is more practical: file disputes on your behalf to correct errors that the service finds on your. According to Howard Dvorkin, CPA and President of Debt.com, one in five reports contains an error. Potential errors include simple confusion due to mistaken identity; accounts wrongly declared by a creditor; or in some cases fraud related to identity theft.
Of course, you can file a dispute directly with a credit agency. But it can be a painstaking and laborious process. When you hire a credit repair company, they agree to handle the dispute for you.
What is a credit report dispute?
Suppose you find an error on your credit file — a credit card opened in your name that you didn’t apply for. Equifax, Experian and TransUnion, the three credit reporting agencies, have a process for individuals to dispute information on the credit report. You can start this process here:
Once you initiate a dispute, the company will initiate an investigation. The agency with the allegedly incorrect information will then notify the creditor, who must provide proof to support the claim within 45 days. At this point, it is up to the agency to delete the transaction or leave it there.
If your dispute is initially denied, there is an escalation process. This usually requires you to send documentation, such as a receipt or voided check, to prove that the report contains an error.
You can also take your case to the creditors themselves. Companies can adjust the information they previously reported. But it can be difficult to convince them to do so.
How much do they charge?
Prices vary widely, starting at around $70 per month. The most reputable companies, such as Sky Blue Credit and Ovation Credit Repair, can charge up to $120 per month with an initial setup fee of $80-$90.
At a minimum, these companies will manage your disputes and advise you. More expensive services will handle more complex issues, such as foreclosures, bankruptcy, and other legal matters. Most disputes take at least two months to resolve, but some can take much longer.
To complicate matters further, credit repair services cannot guarantee that they will successfully solve your problems or repair your credit. They’ll do the legwork for you, but they’ll keep their money whether they fix things or not.
Keep in mind that what you are paying for is outsourcing all the paperwork. If you just need someone to analyze your credit report, there are plenty of free and low-cost options available. Check with your bank to see if they offer advice, or contact a nonprofit organization such as American Consumer Credit Counseling, Money Management International, or InCharge Solutions.
Beware of scams
Not all credit repair services are reputable and some are outright scams. According to the Consumer Financial Protection Bureau, some red flags include steep upfront fees, warranties, and a lack of transparency. As with any business, it’s worth checking customer reviews before signing up.
“Credit repair companies with an A+ Better Business Bureau rating and verified online reviews have generally been successful in disputing errors with one of three credit reporting agencies,” Dvorkin said.
A little googling can be the difference between getting your credit back on track or getting scammed out of hundreds of dollars.
The Verdict: Are Credit Services Worth It?
Time, cost and complexity will determine whether it is worth hiring a credit repair service or settling a dispute yourself. If you’ve already identified one or two issues on your report, such as an account with an inaccurate balance or incorrect personal information, it may be manageable to resolve them yourself. If your credit report is riddled with errors due to unforeseen circumstances like identity theft and you just don’t have time to fix it, you might want to consider hiring a repair service. credit.
“There can be a lot of red tape involved in disputing a credit report on your own, and these companies know exactly what the credit bureaus want to see in an investigation request,” Dvorkin said.