Itās estimated that one in five Americans has an error on at least one of their credit reports, according to the Federal Trade Commission (FTC). If your credit reports are littered with mistakes, or you have poor credit, you might be considering paying a credit repair agency. From incorrect missed payments to inaccurate collection accounts, credit repair companies can contact credit bureaus on your behalf and help you remove inaccurate information from your credit reports.
But the industry is rife with scandals, so understanding what credit repair agencies can do and how they work can help you protect yourself.
How do credit repair companies work?
Credit repair companies send dispute letters on your behalf to the credit bureaus in an attempt to fix inaccuracies on your credit report. They can also be experts at credit legislation and spotting mistakes.
A good credit repair company will check your credit reports with you to identify errors and walk you through the process of disputing errors with the three major credit bureaus: Experian, TransUnion and Equifax.
Your credit report is a detailed record of your borrowing history. These reports can list new credit applications, repayment history, bankruptcies, charge-offs, defaults, owed amounts and more. But sometimes credit bureaus report incorrect information that could harm your credit score.
Removing these errors requires filing a dispute with the credit bureau reporting the error. If you can prove itās incorrect, it can be removed. While you can absolutely dispute credit report errors on your own ā for no cost ā credit repair companies offer the convenience of doing it for you.
How much does credit repair cost?
Credit repair agencies can charge anywhere from $20 to $150 per month, depending on your level of service. There may also be setup fees, first-work fees and late fees. Some credit repair firms also offer additional services with your credit repair plan, such as identity theft insurance and credit monitoring.
Pros and cons of credit repair companies
Credit repair companies charge for their services, and thereās no guarantee that they can improve your credit score or remove errors.
Pros
- Convenience. Credit repair companies can send dispute letters on your behalf, which is helpful for those unfamiliar with credit reporting or the dispute process.
- Additional services. Many credit repair companies also offer things like credit monitoring, identity theft insurance and access to your reports and credit score.
Cons
- Cost. Credit repair companies arenāt free, most charge somewhere between $20 to $150 per month.
- You can DIY. Disputing credit report errors is something youāre legally allowed to do on your own, for free.
- No guarantees. A credit repair company canāt guarantee that it will remove errors or improve your credit score.
- Wrought with legal troubles. The Consumer Financial Protection Bureau has called out credit repair scams and illegitimate companies over the years and has filed lawsuits for illegal billing practices, such as charging advance fees or promising results.
How to find legitimate credit repair companies
There are reputable credit repair companies that follow the laws around what credit repair agencies can and canāt do. Here are six things you should know:
- They canāt charge advance payments. Under the Credit Repair Organizations Act (CROA), credit repair companies can only require payment after promised services are rendered.
- You have the right to cancel services. You can cancel a contract with a credit repair agency within three business days after signing a contract for any reason at all, as protected under CROA.
- Contracts must be in writing. When you hire a credit repair agency, all contracts must be in writing, per the CROA. No services can be provided until you sign a written contract.
- Read customer reviews. The Better Business Bureau (BBB), Trustpilot and Reddit can give you insight into other peopleās experiences with these agencies and reputations. If hundreds of people have similar complaints, thereās a good chance that the complaint is true.
- The agencyās transparency. Look for a company that provides the full terms and conditions of its services and their costs.
- Overall cost. Credit repair agencies can charge anywhere from $20 to $150 per month, so make sure the cost is worth it. One-time first-work fees are also common, typically paid within the first five days, and theyāre often the same amount as your monthly payment.
Compare credit repair companies
Be sure to fully research and compare any credit repair companies youāre considering.
| Credit Versio | Starts at $24.95/month | A DIY path to credit repair. It uses AI to identify what marks are harming your credit score, imports all three credit reports, and offers unlimited disputes and identity theft insurance up to $1 million. |
| Credit Saint | Starts at $79.99/month, plus a $99.00 first work fee | Has a 90-day money-back guarantee, sends disputes to all three credit bureaus and includes score analysis and tracking. |
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The Credit People | Starts at $99.99/month, plus a $19 first work fee | Offers all three credit reports and scores, sends unlimited disputes on your behalf, and ābefore & afterā reports to see progress. |
|
Credit Firm | Starts at $49.99/month | A law firm that reviews credit reports with you and offers a personal credit consultant, credit audit and unlimited dispute and inquiry challenges. |
| Lexington Law | $99.95/month, plus $99.95 first work fee | A law firm that can review credit reports with the three bureaus, sends disputes on your behalf and offers a personalized credit score improvement plan and $25,000 in identity theft insurance. |
| Sky Blue Credit | Starts at $79/month, plus a $79 first work fee | Has a 90-day guarantee and custom services with custom extras, score tracker, 60-day credit updates and credit report reviews, and unlimited credit report disputes. |
3 steps to DIY credit repair
If you donāt want to pay for the convenience of a credit repair service, you can dispute your credit report errors yourself for free in these three steps:
1. Request copies of your credit reports
The FCRA states that you can request copies of your credit reports for free, once per year from each of the major credit bureaus. Right now, the major bureaus are offering free weekly reports that you can easily and quickly request from AnnualCreditReport.com. You can also request copies of your reports directly from the credit bureaus.
Once you have your credit reports, look through all three for any errors. Some common credit report errors include:
- Inaccurate personal information
- Incorrect late or missed payments on bills or lines of credit
- Inaccurate dates of payments
- Accounts that donāt belong to you
- Closed accounts being reported as āactiveā
- Inaccurate collection accounts
2. Send the dispute letters
If you find incomplete or inaccurate information, you can send a dispute to the credit bureau reporting the incorrect information. On your credit report, youāll find instructions for disputing errors, and you may submit disputes online, over the phone or through mail.
For the best chance of success, find proof that the information youāre disputing is inaccurate. For example, if you did pay your credit card on time last month and have proof of payment or a receipt, but your credit reports show a late payment, send a copy of that statement along with your dispute.
3. Wait for the decision
Credit bureaus have 30 days to investigate after youāve submitted your dispute, so it may take a few weeks to hear back. The credit bureau is supposed to forward copies of the dispute and copies of the proof you sent and then send along the results.
Each of the major bureaus also lets you check the status of disputes through their free online accounts.
Will filing a credit dispute improve my credit?
No, a dispute itself doesnāt have anything to do with your credit score. A dispute can only improve your credit score if you can prove the negative mark youāre disputing is inaccurate, and once itās removed, it could improve your credit score. However, depending on the severity of the incorrect mark, the improvement can greatly vary. Thereās no guarantee that a credit dispute will remove a negative mark or that it will improve your credit score significantly.
If you want to improve your credit score and you donāt have any negative marks you can prove are inaccurate, there are many other methods you could use. You can decrease your credit utilization ratio, consider rent reporting services, look into credit-debit cards to add to your payment history and much more.
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Bottom line
If you donāt have any errors on your credit reports, you donāt need a credit repair agency. These companiesā primary function is to help you dispute credit report errors.
For some people, like those who had their identities stolen and have dozens of credit report inaccuracies, a credit repair company could help speed up the process of credit repair. But hiring a credit repair company can be expensive, and itās a service you could do yourself with some time and effort. With a credit repair company, youāre paying for convenience more than anything.
If you donāt have any credit report errors or donāt want to pay a credit repair agency, there are many other steps you can take to improve your credit score.
Frequently asked questions
What if my credit repair company isnāt legitimate?
If you suspect that a credit repair agency is operating in violation of the CROA, file a complaint with the FTC. Thereās no ācredit repair license,ā and the term ācredit repairā is heavily litigated, so empower your decision with deep research into an agencyās history, service and reputation before signing a contract.
