Are Credit Repair Companies Safe to Use?

( – If you’ve got a less than stellar credit score, you may have heard about credit repair companies. Credit repair companies claim to help you repair your credit faster than you could on your own. As you know, your credit score is vital to advancing and achieving major milestones. You need a good credit score to do everything from getting a phone or utilities to financing a car, education, or even a home.

Without a good credit score, you may find that you are denied for loan approvals or that your approval is contingent upon accepting a high interest rate. This is where credit repair companies come in. Unfortunately, many of them are scammy. Here’s how to determine whether the credit repair company you’re considering working with is legitimate.

Why Consider a Credit Repair Company?

Your credit score is based upon your prior purchase history. If you didn’t pay prior loans, mortgages, etc. on time, or if you carry a high credit card balance, that will negatively impact your score. Credit histories also include the amount of time you’e had a credit history, the age of your credit, and whether you have any bad marks on your history. A bad mark could include a missed payment that has been reported to the credit bureaus, erroneous information that you should have removed from your credit report, or monies owed when no payment arrangements have been made.

Your applications for credit and loans will also appear as soft or hard inquiries depending upon what it is you were applying for and how the vendor chose to report it to the credit bureau. Your debt to income ratio is also vital to determining your score.

How Do Credit Repair Companies Work?

Legitimate credit repair companies are best for people who have many bad marks to remove from their credit history. The goal of a credit repair company is to improve your score by getting negative marks taken off of your credit report. To do this, they charge you a fee. If you choose to do this, you should do it well in advance of applying for a large loan or mortgage rather than just before the process.

When the credit repair process begins, they’ll request reports from Experian, Equifax, and TransUnion, the three credit reporting bureaus. Then, they’ll scrutinize negative information on the report like late¬†payments, collections, and bankruptcies, and formulate a strategy for removing this info.

Many negative entries can be removed with a debt dispute, as this causes the debtor to go through a validation process for each debt.

How Do You Pay For Debt Repair Services?

Companies that do this typically use one of two payment methods:

  • Pay-Per-Deletion: With this, you pay a set fee for every bit of negative information the company removes.
  • Subscription-Based: You subscribe to a service to continually remove negative remarks. This usually costs $50-$100/month.

A legitimate company will not tell you to avoid contacting credit reporting agencies at any time. They won’t take money before they complete services, and they won’t tell you to report false information or do anything illegal. They should provide you with information about your rights and a contract in writing.

Is Hiring a Credit Repair Company the Right Choice?

There are no statistics showing whether credit repair companies actually help. For you, it may be a choice of time vs. money: if it makes more sense for you to spend time clearing your credit report yourself, you may wish to avoid hiring a company. If you have dozens of black marks on your credit report or are working multiple jobs, you may find that paying a company to do this for you is worth it.

Remember: any marks that are verifiable and accurate are not things that the credit bureau can remove.

If you do go with a credit bureau, remember to thoroughly investigate them. They should not pressure you, demand large sums upfront, or encourage you to do anything false or illegal.

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