When your credit score is in the dumps, you want to do everything you can to get that score up, especially if you need to buy a car or a home, or apply for new credit. Most people don’t know the first thing about getting their score up, so they turn to credit repair services to do the work for them. In many cases, this can be a smart move, especially if you don’t know where to start. But here are a few things to keep in mind when you are considering using a credit repair service.
The Government Regulates Credit Repair Services
Credit repair services have traditionally been known as scams, where companies promise to raise your score if you pay them, and then they do nothing to help and you are out your money. And before the government stepped in, this was often the case. Now, with the passage of the Credit Repair Organizations Act, credit repair services must follow strict government guidelines in order to operate. Here are a few rules they must follow:
- Fees: Credit repair services can charge you an initial fee to get started, but after that, they cannot ask for money until they have completed the work that you agreed upon. This doesn’t mean that you only pay if your score goes up; you pay when they complete the work they promised, as in correcting errors on your credit report or sending good faith letters to lenders.
- Guarantee: Credit repair services cannot guarantee to raise your credit score. All credit reports are different, and some scores just cannot be raised without waiting for negative marks to fall of your report (after 7 years.) Many credit repair services do offer guarantees, but this are often related to the work they do and not if your score was raised.
- Cancellation: Credit repair services must offer easy cancellation policies, so you aren’t stuck in a long contract. Most credit repair services operate on a month-to-month basis, so you are only paying monthly for the services and can cancel any time.
- Contracts: By law, every credit repair service must provide a written contract to each customer with all the details of the agreement. Make sure you get everything in writing before you proceed with a credit repair service.
- Credit Reports: Credit repair services also cannot pull your credit report for you. That being said, many credit repair services partner with one or two of the credit bureaus, and the credit bureaus can share your credit information with the credit repair service.
If the credit repair service you are looking at goes against any of these rules, it is probably a scam and you should steer clear. If they do follow these rules, you should be in good hands.
Credit Repair Services May Not Always Be Able to Help
There is a reason that the government won’t allow credit repair services to offer a guarantee to raise your credit score: Not all credit scores are able to be fixed. If you have legitimate negative marks on your credit report, they may be very hard to remove. Here are a few things that credit repair services may be able to fix:
- Errors: If you have errors on your credit report, credit repair services should be able to fix them. Whether it be a mistake in your personal information or negative mark that doesn’t belong, credit repair services know how to file the proper paperwork to get errors removed from your report.
- Old information: If you have negative marks from a company that was bought by another company or has gone out of business, credit repair services can contest those marks with the credit bureaus. By law, the credit bureaus have 30 days to prove that the information is correct. If they can’t, it has to come off your report. So if the bureaus can’t get ahold of an out-of-business lender, the negative items must be removed.
- Negative marks that can be negotiated: The best credit repair services have a good knowledge of the credit reporting rules, as well as relationships with all the big lenders, so they may be able to negotiate some of the negative marks off of your credit report, especially if you have been paying your bills on time recently.
Credit repair services have other tricks in their bag, but these are the most common ones that they use. If you believe that all of the negative marks on your credit report are legit and cannot be negotiated, spending the money on a credit repair service may not be the best option for you.
You Can Do Some Credit Repair on Your Own
While the top credit repair services have decades of experience dealing with the credit bureaus and lenders, you can also do what they do when it comes to fixing your own credit. You are allowed to file the paperwork to have items removed from your credit report. You can negotiate with your lenders to have negative marks removed, especially if you’ve been good with paying on time recently. And you can research credit reporting loopholes that can help with having negative items removed. If you think you can’t afford a credit repair service and don’t mind doing the extra work, try doing your own credit repair work.
The Top Credit Repair Services
We have full reviews of the top credit repair services here, but here’s a quick breakdown of the top three:
SkyBlue Credit Repair: Costs $59 to start and $59/month after. Does basic error removals, lender negotiations, etc. Offers a 90-day money back guarantee if you are not satisfied.
Lexington Law Credit Repair: Costs $99 to start and $99/month after. Does basic error removals, lender negotiations, etc. along with providing credit report updates and other bells and whistles.
CreditRepair.com: Costs $89/month with no initial fee. Does basic error removals, lender negotiations, etc. along with providing credit report updates, a great mobile app and other bells and whistles.