Over the years, many people have asked me whether it’s worth it to pay a credit repair firm to remove negative information from their credit reports.
My typical reply is: No, it’s usually not worth it – mainly because hiring a credit repair company to fix your credit is often a frustrating waste of time and money.
But the key is to know what a credit repair business can and can’t do for you – and how to avoid con artists preying on your desire to boost your credit rating.
Here are 7 things many credit repair firms won’t tell you.
You don’t have to pay any one to fix mistakes in your credit reports
According to the Fair Credit Reporting Act, any information that is inaccurate, outdated or that can’t be verified must be removed from your credit report within 30 days once you dispute it.
So if you’ve seen your credit reports recently, and discovered mistakes in your credit files, you don’t need to pay anyone to get those errors removed. You can do it yourself, just by writing the credit bureaus.
In fact, the three main credit-reporting agencies – Equifax, Experian and TransUnion – make it easy to dispute credit errors, by snail mail or electronically. Furthermore, the credit bureaus all have online dispute resolution services that are fast, easy and free to use.
Here are links to each credit reporting agency’s online dispute resolution service:
Credit repair companies don’t have the power to unilaterally get rid of negative information that is accurate
Despite what many representatives at credit repair agencies may tell you, no matter how much you pay them, they can’t single-handedly make certain information disappear from your credit reports.
For instance, if there’s a late payment, charge-off or bankruptcy reported on your credit files, and that info is accurate, it won’t somehow magically get removed from your credit files just because you paid a credit repair specialist.
Any information that is negative – but correct – only falls off your credit report in one of two ways: through the passage of time, or because the creditor or entity that was reporting the negative information agreed to delete it.
The credit repair industry is loaded with scams and bogus claims
Unfortunately, fraudulent credit repair businesses are rampant in America.
I’m not saying all credit repair companies are filled with con artists. For example, a lot of people have used Lexington Law and were very satisfied with the company.
But for every one legitimate credit help firm, there are many others in the credit repair industry making questionable claims. If you see bogus statements like the ones below, you know you’re dealing with a shady company:
“We can create a new credit identity for you.”
“We help you get a different Social Security number.”
“We erase all negative information from your credit report fast!”
“We eliminate charge-offs, collection accounts and repossessions – 100% guaranteed!”
When you come across claims like these, remember the old saying: If it sounds too good to be true, it probably is.
Some negative info on your credit report is about to disappear anyway
Sometimes, you might have negative marks on your credit that’s about to come off in a short while, perhaps a few months to as long as a year or so. So paying a credit repair firm often doesn’t make sense, when those credit blemishes will soon fall off your credit report anyway.
Remember: most negative information, like late payments, can legally stay on your credit report for seven years. For some negative data, such as a bankruptcy, it can be reported for as long as 10 years. After that, the negative data is supposed to be removed, according to federal credit laws.
But again, you don’t have to pay for outdated negative information to get erased from your credit reports. It’s your right as a consumer.
Credit repair businesses often use questionable tactics that backfire
In case you’re wondering how credit repair companies sometimes manage to improve someone’s credit reports, it’s often because they’ve simply disputed the information in question with the credit bureaus.
But they don’t typically send just one or two disputes. Often, a credit repair company will send five, 10 or even more disputes to a credit-reporting agency.
They do this because they know that, under federal law, credit bureaus have 30 days to investigate any disputes. So credit repair agencies are counting on the fact that a business that’s reported some negative credit data about you may not respond in time to a credit dispute.
What credit repair firms don’t tell you, however, is that a credit bureau can decide to totally ignore such a slew of credit disputes sent en masse, on the grounds that they are “frivolous” disputes. When this happens, you’ve paid money but your credit report hasn’t improved one bit.
It’s usually better to go directly to your creditors to fix errors
Ultimately, the single best way to have negative information that is inaccurate removed from your credit reports is to contact the creditor directly.
It doesn’t matter if that creditor was a utility company, a credit card firm, perhaps your mortgage lender, an auto lender, a finance company, a charge card company, or a retailer.
If any of these businesses posted any negative information about you, and that info is erroneous, it’s wise to contact that creditor first to try to have them to remove the information.
The reason I suggest going to the creditor first is that when they delete the information, they can update their own records too, so that information is less likely to be re-posted to your credit reports later.
Sometimes, consumers want to hire credit repair firms or go directly to the big three credit bureaus, in order to get negative information removed. You might be successful in doing that – at least temporarily.
However, frequently what a lot of people will find is that a month, two months or perhaps three months or more down the road, that negative information pops up on their credit reports once again. That’s why it’s always best to go right to the source, to the creditor who has reported the negative information about you.
It’s illegal for credit repair firms to ask you to pay before services are rendered
Under the Credit Repair Organization Act (CROA), it’s against the law for a credit repair company to lie about what they can do for you or to charge you upfront fees.
But sadly, both of these violations happen every day.
In fact, I was in the hair salon recently and an employee was on her cell phone talking to a credit repair company rep that wanted her to pay $500 for the firm’s services.
I wasn’t eavesdropping, but I couldn’t help but overhear the conversation.
When she hung up, I asked her about it. She told me the credit repair salesperson said the $500 advance payment was required in order to “guarantee” that they could “remove all negative information” from her credit report.
As you can imagine, I told her that those were sham claims, and I strongly suggested that she not fork over her hard-earned money.
Tips for Spotting Credit Repair Frauds That Break the Law
CROA gives you other rights too.
For instance, if you do sign up with a credit repair firm, you have 3 days to change your mind and cancel without any charges whatsoever.
Under CROA, a credit repair company is also supposed to advise you how long it will take to get results, and specify the total costs you will pay.
If you don’t get this information from a credit repair firm, it’s a big red flag that the business isn’t operating on the up and up.
Finally, if a credit repair company doesn’t tell you about your rights as a consumer, or tries to rush you into a contract without giving you time to review everything and evaluate your options, those are two other warning signs that the company probably isn’t legitimate.
No matter how bad your credit might be, never let anyone pressure you into making a fast decision or signing any kind of agreement that you don’t fully understand.
Remembering the tips above will help you spot the difference between a legit credit repair firm and one that’s only trying to scam you — or make a fast buck at your expense.
Frequently Asked Questions
Q: Where can I find credit repair companies that are legit?
A: Legitimate credit repair companies can be found by researching and checking for accreditation with reputable organizations such as the Better Business Bureau or the National Foundation for Credit Counseling. It is also important to read reviews and testimonials from past clients and to beware of companies that promise quick fixes or ask for upfront fees.
Q: How soon should I expect to see an improvement in my credit score if I work with a credit repair company?
A: The amount of time it takes to see an improvement in your credit score will depend on several factors, including the severity of your credit issues and the actions taken by the credit repair company. Generally, it can take anywhere from a few weeks to several months to see an improvement in your credit score. However, it is important to note that credit repair companies cannot guarantee specific results or a specific timeline for improving your credit score. Additionally, any legitimate credit repair company will not make promises of immediate results or offer a quick fix solution. It’s important to have patience and remain committed to following the credit repair company’s advice and implementing the recommended actions to improve your credit score over time.