Credit repair involves rebuilding your credit by fixing errors on your credit report. These errors cause your credit to appear poor and can prevent you from obtaining a credit card or personal loan. Poor credit can even keep you from getting a job or renting an apartment.
You can rebuild your credit yourself, cost-free, but often the term “credit repair” refers to hiring a company to fix your bad credit through the removal of incorrect, negative information. These companies are for-profit and work for a fee.
How does credit repair work?
If you hire a credit repair company, they work on your behalf to remove inaccurate information by communicating with the credit bureaus—Experian, Equifax, and TransUnion—and possibly banks and collection agencies to dispute the errors.
If you opt for DIY credit repair, you can rebuild your credit for free by:
- Requesting your credit report from the three reporting agencies. You can receive weekly free credit reports from the three bureaus now through April 20, 2022, by going to AnnualCreditReport.com.
- Reviewing your reports for inaccuracies. Look closely for discrepancies in your name, address, balance amounts, and payment history. The Consumer Financial Protection Bureau provides this instruction sheet explaining what to look for.
- Disputing errors. It’s important to dispute any errors right away. Check out the CFPB guide on how to challenge credit report info.
- Paying off debts. It’s in your best interest to pay off debt quickly so your credit can improve.
How much does credit repair cost?
You can explore DIY credit repair at no cost—on your own, using online resources (such as the CFPB), or with the help of a free credit counseling organization.
Credit repair services with a for-profit company 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, with fees ranging from $50 to $130 or more.
The per-item option only charges you once information is removed from your credit file. This may start around $35 per deletion and could range to $750 or more.
You might also pay setup fees or a fee for accessing your credit reports.
How long does credit repair take?
The credit bureau usually has 30 days (up to 45 in some cases) after receiving your dispute to investigate and verify information. The credit bureau is required to send you the results of the investigation within five business days of its completion.
But these numbers are just a guideline, as every case is different. Unfortunately, no professional can say exactly when your credit score will improve.
When choosing a credit repair company to fix your bad credit, don’t ask about the future. Instead ask what real clients have experienced in the past, as credit repair services aren’t always reliable or truthful.
What to watch out for with credit repair companies
The CFPB found that more than half of people who submitted complaints about credit repair companies cited fraud or a scam.
Thankfully, if you use a credit repair company, you’re protected under the Credit Repair Organizations Act (CROA). Some key regulations include:
- companies can’t guarantee removal of information from credit reports,
- companies can’t advise you to make false statements or change your identity,
- you can’t be charged any fee for services that haven’t been fully provided.
Before signing up for credit repair services, 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. This CFPB report lists more red flags to be aware of.
How does credit repair affect your credit score?
Ideally, credit repair should mend any inaccuracies in your credit report, helping your score to improve and gain points. It should help restore your credit score so that it accurately reflects your credit history — the good and the bad.
When to use a credit repair company
If poor credit is holding you back, it might be tempting to jump quickly into a contract with a credit repair company. But it could be to your benefit to take your time and weigh your options, as you could achieve the same results and save money with DIY repair. Or if you feel you need help navigating, you could contact a free credit counseling organization.
The best option is the safest option, and either way you choose will involve time and research on your part.
If you do decide to pursue credit repair with a for-profit company, you should study your consumer rights and vet the company by researching user reviews, checking with the Better Business Bureau, and being alert to any red flags.
Have questions about your credit? Find out more about TDECU credit opportunities today.