Compare credit repair companies

What is credit repair?

Credit repair involves cleaning up any negative marks on your credit report that may have slipped through the cracks, such as errors and delinquent accounts. You can do it yourself, or you can hire a credit repair agency to remove incorrect or duplicate listings on your credit report.

Credit repair agencies are experts at credit legislation and spotting these erroneous listings — holding credit bureaus, banks, debt collectors and lenders accountable for reporting accurate information.

However, while many credit repair agencies are legit, watch out for predatory practices. If a company claims you can’t improve your score by yourself or guarantees it will increase your score, these are signs of a predatory credit repair company. When considering hiring any company, do your due diligence and scope out reviews online, such as the Better Business Bureau.

What do credit repair companies do?

The process of credit repair varies by company, so ask about the specific agency’s process before you apply. Generally, you’re offered a complimentary initial consultation, after which you or the agency will:

1. Read your file. The agency carefully reviews your credit report for incorrect listings and methods available to improve your score.
2. Apply for credit repair. You’ll complete a form detailing the listings or faults you want the agency to examine.
3. Accept your claim. If the company decides it can help you, it accepts your application and looks into your credit history.
4. Contact creditors. The agency contacts your creditors to determine which defaults can be removed from your report. An agency may also help negotiate a debt repayment plan with creditors if you owe a debt.
5. Pay a fee. The Credit Repair Organizations Act prohibits an agency from requiring upfront charges before taking on your case. Instead, you may pay fees throughout the process to cover the time needed to address incorrect listings.
6. Remove listings. If the credit repair agency is successful in its negotiations, the creditor removes the erroneous listings from your file.

Your credit report is a detailed record of your borrowing history — credit cards, bank accounts, mortgages, other loans and more. It lists applications you’ve made for all forms of credit (approved or not), your repayment history, details of any defaults or bankruptcies you may have, your current debt, information on the accounts you currently hold and any court judgments against you

Lenders and other providers use this information to assess the risks of giving credit to someone.

How to compare credit repair agencies

With so many credit repair agencies in the US, consider the following factors when weighing whether an agency is reputable.

• Transparency. How up front is each company about the cost you will have to pay? Look for a company that provides the full terms and conditions of its services before handing over your money.
• Reputation. Is the company a trusted name in the industry, and does it have a history of satisfied customers? Look for a respected company with an impeccable service record.
• Customer reviews. Online review sites can give you an idea of the experiences other people have with these agencies — and, importantly, how each company treats its customers.
• Overall cost. Cost is obviously an important factor to consider, but you’ll want to find the ideal combination of affordable price and quality services.

Note that, unlike other agencies, states don’t require these companies to have a “credit repair license.” Empower your decision with deep research into an agency’s history, service and reputation before signing a contract.

The benefits and drawbacks of credit repair

How to repair your credit by yourself

If you’re ready to get started improving your credit score, here’s the process to repair your credit.

1. Find the causes of your bad credit.

Get a copy of your credit report — it’ll show you the negative items that led to your poor credit score. By federal law, you’re allowed to get a free copy of your credit report from the major credit bureaus every 12 months.

When you receive your reports, look for three things in particular: inaccurate information, past-due accounts and maxed-out accounts.

2. Dispute inaccurate information.

If you find information that’s incomplete or inaccurate, have it removed or changed. On your credit report, you’ll find instructions for disputing errors. You may submit disputes online or through phone or mail.

According to many experts, mail is the best way to submit your dispute. For one, you can include more hard evidence that supports your case.

Note that submitting a dispute online can tie your hands: If you agree to the terms of an online form, you may waive your right to sue a credit bureau if you’re unhappy with how it’s investigating your complaint.

3. Get current on past-due accounts.

While being in debt doesn’t necessarily hurt your credit, late and missed payments most certainly will. Focus on past-due accounts that are delinquent for fewer than 180 days. Contact your creditor to explain that you want to get current on your account. They may be willing to work with you to make repayment easier — for example, by letting you repay over time instead of all at once.

Next, pay off accounts that have been charged off — these are payments more than 180 days late. If your creditor sold your debt, you’ll make payments to a third-party debt collection agency.

Paying a charged-off account probably won’t improve your credit score much. But if your credit history shows you haven’t paid your debts, lenders will be wary about extending new credit to you.

4. Fix your credit utilization ratio.

Credit utilization ratio is how much of your total credit you’re using. Say you have two credit cards, each with a $500 balance and a $1,000 credit limit. This means you have $1,000 in total balances and $2,000 in total credit. Your credit utilization ratio is $1,000/$2,000 — or 50%.

To increase your credit score, pay off your credit card balances. Most experts recommend keeping your credit utilization ratio under 30% for each credit card.

5. Add new sources of credit.

Erasing damage to your credit score can feel like digging yourself out of a deep hole — it’s tough but doable. After you’ve made significant progress, find new ways to build your credit.

One of the best ways to add new credit is to get a credit card. Since you have bad credit, focus on secured cards and store cards — and, if necessary, subprime cards. Also, consider becoming an authorized user on someone else’s account or applying for loans.

What you should know before hiring a credit repair company

Scams often target financially distressed individuals, and the credit repair industry is no exception. The FTC warns that many credit repair scams promise to remove negative information even if it is accurate, such as bankruptcies.

In 2010, the FTC amended its Telemarketing Sales Rule to help reduce the number of scams by prohibiting credit repair companies from charging any fees up front and only collecting payment once inaccurate information has been removed from your credit report.

Hiring a credit repair company can be expensive, and some argue it’s a service you could do yourself. Plus, credit repair can only remove inaccurate information. Depending on your situation, your credit report may benefit more from paying off debt or delinquencies instead.

Before hiring a credit repair company, carefully consider if you could improve your credit through other methods.