What Is a Credit Repair Service and Should You Use One?

credit repair services

Bad credit can cost you by way of high interest rates and higher insurance premiums. It can delay dreams of buying a house or starting a business.

People with bad credit often seek out credit repair services to help them reach their financial goals.

Before choosing a credit repair service, however, make sure you know what they can and can’t do, and watch out for scams.

What do credit repair services do?

Several factors go into your credit score, so the reason for your bad credit may not be immediately apparent. It may be that you’ve missed a few payments, have accounts in collections, filed bankruptcy, or your credit card balances are too high.

In cases where negative items are legitimate, you simply need to wait it out. Most negative items take up to seven years to fall off your credit report. They also lose their potency over time as new, positive information gets reported to the credit bureaus.

When negative information on your credit report is incorrect, you can submit a dispute to the credit bureaus to correct the error. But according to a March 2017 Consumer Financial Protection Bureau report, consumers often complain that the bureaus are slow to respond to disputes – and sometimes don’t even fix the problem.

What’s more, the dispute process can be confusing and require a lot more time and effort than you have. You may also need to contact the creditor in question to get documents to substantiate your claim. The process can be overwhelming.

This is where credit repair services come in – they can do the dirty work for you.

Credit repair services know the ins and outs of credit disputes. If you choose a good one, they’ll understand your rights and which laws protect you.

Watch out for scams

If you have bad credit and are desperate for a quick fix, you may be more susceptible to a credit repair service fraud. Here are a few things to watch out for:

1. They ask for money upfront

The Credit Repair Organizations Act prohibits credit repair companies from charging before they’ve performed their services. If a company asks for payment just, run in the other direction.

2. It sounds too good to be true

Unfortunately, there is no quick fix to credit report problems. Credit bureaus have 30 to 45 days to respond to your dispute. It may also take a while to gather the documentation to provide evidence of your claim. It’s a red flag if a credit repair service promises overnight results.

Also, credit repair services can’t legally promise things that they can’t do for you. They know that rebuilding credit is your goal. But if you see an ad stating that they’ll guarantee a solution, or they can get rid of legitimate negative items on your report, it’s a scam.

3. They don’t do all the work

Before you sign a contract, understand exactly what the credit repair service will be doing for you. Their goal should be to make sure your credit report is 100 percent accurate, fair, and substantiated. As such, they should be doing more than simply submitting disputes in your name – something you can do on your own for free.

To get your money’s worth, ensure that the company will reach out to the named creditors to get evidence for your dispute. They should also share which laws protect you in your particular case and how they will use those laws to your advantage.

Know your rights

If you feel uncomfortable at any time before signing a contract for credit repair services, listen to that feeling. Also, let the company know that you understand your rights regarding credit repair services, including:

  • You have the right to sue a credit repair company if it violates the Credit Repair Organization Act in any way.
  • You have the right to cancel your contract for any reason within three business days of signing it.
  • The agreement must include a full and detailed description of the services they will perform. It should also include a timeline they’ll adhere to as they complete them.

Should you opt for a credit repair service?

If you want free credit repair services, you’ll have to do it on your own. The good news is that you can do just about anything a credit repair service can do. The real question is whether you know how to.

If you have just one or two simple errors that you can easily prove, you likely don’t need to pay a credit repair service to do the work for you. When going this route, use the Federal Trade Commission’s website to learn about your rights and steps you can take to rectify the errors.

If your case is more complicated or requires more time-intensive work, hiring a credit repair service may be worth the money. Take a look at what you’re up against and consult a credit repair company to see whether it’s worth doing on your own or hiring them. If you go this route, choose a company that is open and honest about what they can provide. They should also outline their commitment to your rights and the laws that protect you.

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