If you have black marks on your credit report that are keeping you from accessing new lines of credit, then you may have looked into credit repair as a possible solution. But does professional credit repair really work, and is it worth it?
The answer is that professional credit repair can work, but there are no guarantees. Your chances of success depend on your situation. Read on to learn more.
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What do credit repair companies actually do?
If you have damaged credit (i.e., a bad credit score and a lot of derogatory marks on your credit report), the process of fixing that is called credit repair. It’s possible to fix your credit entirely on your own, but doing so can be stressful and time-consuming.
That’s where credit repair companies come in. They can try to remove inaccurate or harmful information on your credit reports on your behalf.
Below are examples of services that a legit credit repair company may provide:
- Obtain copies of your credit reports
- Help you check your credit score
- Review items in your credit history
- Dispute items on your credit report
- Negotiate with your creditors and debt collectors
These are useful services, but to reiterate, you can do all of that yourself for free. Nonetheless, professional credit repair can be worthwhile if you don’t have the time or energy to fight bad credit on your own.
How does credit repair work?
The tactics that credit repair companies use are pretty straightforward. Almost all of them work in one of two ways:
- Challenging the accuracy of negative marks: Disputing an item on your credit report involves sending letters to the credit bureaus. If the negative information on your credit report can’t be verified, the credit bureaus have to delete it within 30 or 45 days. 1
- Persuading creditors or debt collectors to delete negative marks: Credit repair experts may send goodwill letters (asking your creditor to delete a negative mark out of kindness) or try to negotiate pay for delete (a strategy where you propose to pay some or all of a debt in exchange for a clean slate).
As you might expect, these approaches involve sending a lot of letters and making a lot of calls. For this reason, credit repair often works in cycles because of the time required to process and respond to your disputes and proposals.
How likely is credit repair to work?
Credit repair companies use the strategies listed above to try and improve your credit profile. (Again, these are the exact same methods you’d use to remove negative items from your credit report yourself—hiring a company just saves time and energy.)
The obvious question is: how well do these strategies work? The answer depends on which of the following situations you’re in.
Most of the marks damaging your credit are errors
If your bad credit score was caused by genuine errors on your credit report, such as misreported debts or credit accounts that don’t even belong to you, then you’re legally entitled to have them removed.
If you’re in this situation, credit repair will almost certainly work (although you might have to be persistent, since the credit bureaus are sometimes slow to act).
Most of the marks damaging your credit are legitimate
On the other hand, if the derogatory marks on your credit report aren’t mistakes, then things become much less certain. That’s because the strategies for removing legitimate marks basically all boil down to negotiating with your creditors and debt collectors, and your odds of success depend on how accommodating they feel like being.
Your creditors and collectors aren’t obligated to accept your terms (or even to consider them). While these negotiating tactics can work, the results are, to a certain extent, out of your (and your credit repair company’s) hands.
How long does credit repair take?
How long it will take to repair your credit depends on what’s bringing your score down and how badly your credit was damaged. When credit repair is successful, it can take as little as one month or up to several months.
There is, however, a solid timeline for certain stages of the credit repair process:
- Credit disputes: Under the Fair Credit Reporting Act (FCRA), the credit bureaus have 30 days to investigate disputes (or up to 45 days in some cases). They then have to notify you of the results within 5 business days. 2
- Credit account updates: If one of your creditors or a debt collection agency agrees to remove a negative mark associated with one of your credit accounts, it won’t disappear right away. Most companies only report account updates to the credit reports once every 30–45 days. 3
Unfortunately, there’s no way to speed up the credit repair process. No matter how efficient a credit repair company is, they won’t be able to wipe your credit history clean or transform a bad score into a good credit score overnight.
When credit repair probably isn’t worth it
You know how credit repair works (and why success isn’t guaranteed), but the question remains: is professional credit repair worth it?
Most of the time, that’s a question you have to answer for yourself. It depends on how willing you are to pay money for results that aren’t guaranteed. However, there are several situations in which credit repair almost definitely won’t be worth the money:
You have only legitimate negative marks on your credit report
Again, while it’s possible for a credit repair organization to remove valid negative marks, there’s no surefire way to do so.
Even if they do initially succeed, there’s a chance that the deleted item will reappear on your credit report later on once it’s verified.
Although credit repair is legal, neither you nor any credit repair company has the legal right to remove accurate derogatory marks in your credit history. If all of the marks on your credit report are legitimate, you may be better served by looking into other (free) ways to fix your credit.
You’re drowning in debt
If your credit problems stem from current debts you can’t pay off, then credit repair will only add to your list of expenses. Your vicious circle of debt will only get worse, which may cause you to incur more negative marks and damage your credit even further.
You’re better off addressing the root of the problem by getting credit counseling or exploring ways to get out of debt. Improvements in your credit rating will naturally follow over time.
You have time to pursue DIY credit repair
As mentioned, if you have enough time and energy, you can rebuild your credit on your own instead of paying a credit repair company to do it for you. Credit repair companies don’t have access to any special tools or methods, so you won’t necessarily have less success than they will—as long as you’re persistent.
The negative marks on your credit report are very old
Negative information will eventually fall off your credit report on its own, usually after 7 years (or 10 years for some bankruptcies).
If you struggled with credit a long time ago and the black marks on your history are approaching their credit reporting deadlines, it probably isn’t worth paying a company to remove them early; just monitor your credit reports to make sure that they’re removed on schedule. (If they aren’t, write to the credit bureaus and demand their immediate removal.)
How much does credit repair cost?
The cost of credit repair varies depending on the company you choose and the services you need. Most companies have a fixed payment structure, although there may also be hidden costs such as cancellation or startup fees.
Credit repair companies generally charge for their services in one of two ways:
- Subscription services: The credit repair company charges you a monthly fee. These subscriptions generally cost somewhere in the range of $50 to $100 per month.
- Pay per delete: The credit repair company charges you for individual items they’ve removed from your credit report, with more severe or damaging items often costing more to remove. In many cases, if the company gets an item deleted from all three of your credit reports, they’ll charge you three times (once for each deletion).
The costs of professional credit repair can add up quickly, which is why it’s important to be sure it will be worth it before you commit to the process.
How to avoid credit repair scams
While there are plenty of reputable credit repair companies out there, the industry is rife with scammers. It’s important to know the red flags to watch out for.
What are the signs of illegitimate credit repair?
Steer clear of credit repair companies that do any of the following:
- Promise to remove accurate items or increase your credit score: No organization can make these types of guarantees. Those that do are trying to mislead you.
- Encourage you to lie to creditors or the credit bureaus: It’s against the law for credit repair companies to lie to lenders or credit reporting agencies or ask you to lie. 4
- Pressure you to pay upfront: Under the Credit Repair Organizations Act (CROA), credit repair organizations can only charge you for services they’ve actually completed. 4 If they used telemarketing to get you to sign up, then they have to wait an additional 6 months before charging you.
- Don’t explain your rights: Credit repair organizations are required to give you a written statement summarizing your credit repair rights (including your right to dispute information yourself and cancel your contract with the company within three days of signing).
If you spot a credit repair scam, report the company to the authorities by filing a fraud report with the Federal Trade Commission (FTC), submitting a complaint to the Consumer Financial Protection Bureau (CFPB), or notifying your state attorney general.
Do your research
Before hiring a credit repair expert, do a thorough search online to verify that the company is legit.
Start by taking these three steps:
- Read reviews and consumer complaints against the company on the Better Business Bureau website.
- Use the Better Business Bureau’s Scam Tracker so that you know what companies to avoid in your area.
- Search the company’s name in the Consumer Financial Protection Bureau’s complaint database.
- Read through customer reviews of the company you’re considering hiring on other sites like TrustPilot, Google, and social media pages.
Know your rights
To avoid credit repair scams, it’s important to understand your rights. In particular, there are two laws you should be familiar with:
- Credit Repair Organizations Act (CROA): This is a federal law governing what credit repair organizations can and can’t do.
- Fair Credit Reporting Act: This is another federal law governing what your credit report shows. It also gives you the right to access your credit reports and dispute inaccurate information.
Depending on where you live, your state may also have its own laws governing credit repair companies.
