Credit Repair

Credit Repair

Many Americans have low credit scores, which is a big problem. It makes it hard to get a credit card, rent a place to live or get a personal loan on favorable terms. People want to solve this problem so badly that they are ready to pay a lot.

This is precisely what credit repair agencies take advantage of, promising to improve your credit score in the shortest possible time. 

When you apply to such organizations, they analyze your credit report, find some negative marks, and plan how they can remove them. Next, they communicate on your behalf with the credit bureau and explain what they want to fix on your credit report and why. If they succeed, the negative marks disappear or are no longer valid, and your credit score improves. 

However, you should know that even the best credit repair companies do not always work out a deal with the credit bureaus, so there is no guarantee that you will get the results you want. So, should you pay for such a service? Let’s find the answer to this question together.

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Best Credit Repair Companies in 2022

What is Credit Repair?

Many companies in the American market are willing to help you improve your credit score by removing errors and negative marks from your credit report. 

Often, this method yields positive results when the actual lender or credit bureau has made an error on your credit report. In such a case, the main task of credit repair companies is to find the error, do all the paperwork, and correspond on your behalf with the credit bureau until they remove the negative mark from your report. 

However, most users want credit repair companies to fix their credit scores when there are no errors. If a low FICO score results from not paying your loans on time, there is little chance of credit repair success. 

It is important to note that credit repair is different from debt settlement or credit counseling. We will go into more detail about this at the end of this article with a comparison chart. 

How Does Credit Repair Work?

Credit repair is the name given to the process of discussing errors on your credit report by employees of credit repair companies. However, it should be noted that this is only one option.

To begin with, everything these companies do, you can do yourself if you have the time, desire, and a little knowledge in the field. Their job is to find an error on your credit report, gather all the supporting documents, and send the template dispute letters to credit bureaus.

Which of these can you do yourself? Everything, because the templates and instructions have been freely available on the Internet for a long time.

Moreover, the problem with credit repair services is that they cannot guarantee you a result. This process can take months or even years, you will pay money for each month, but you will not know if you will improve your credit score. 

If you want to save money and still get a better FICO score, you may wish first to contact credit counseling agencies with financial experts. They can help you div out how to schedule your debts better and what your credit improvement plan should be. 

Lowering your credit utilization, paying off all your loans on time, and gradually paying off your existing debts will give you a more predictable result in improving your credit score. You can add credit repair service to this list as a supplement but not as a primary tool to get results. 

Credit Repair Loophole 609

The Fair Credit Reporting Act says that if you find any incorrect information on your credit report, you can use your right to write a letter of dispute to the credit bureau and ask for it to be removed. The negative mark will be removed if such an error exists – that’s what the 609 loophole says. 

However, many articles or credit repair companies on the Internet claim that the 609 loophole will get you out of debt and not have to pay it back. Is it true? 

The answer is no. It makes no difference what form you file your letter of dispute because the vital thing the credit bureaus look at is the error on your credit report. If it is accurate, they can remove it from your credit report. 

Remember that some of the best credit repair companies are willing to promise you anything as long as you pay them money. So don’t believe that the 609 loophole will miraculously save your situation. 

What is a Credit Repair Company?

An organization that helps you improve your credit score by disputing mistakes in your credit reports is called a credit repair company. They differ from credit counseling organizations because they do not help you learn to manage your finances better or pay off debts gradually.

Even the best credit repair companies do not work with your existing credit but only try to remove the negative marks from your previous loans. 

It is important to note that while credit counseling agencies are nonprofit financial education organizations, credit repair services are provided by private companies for a reasonably high fee. One of the biggest problems in this area is scams because credit repair service does not require a license, and many scammers take advantage of that. 

Before paying any credit repair company, ensure they are trustworthy, have authentic reviews, and work for results.  

How Does Credit Repair Company Work?

Suppose you wanted to improve your credit score and asked a credit repair company for help. Then you pay a monthly fee for their services and a down payment for your work. What does the credit repair company do now? 

  • The first thing they do is look at your credit reports. 

Their job is to find any possible mistakes so they can ask the credit bureau to remove the negative mark. 

  • Next, they fill out the paperwork and send it to the credit bureau. 

The staff explains the situation on your behalf in these documents, shows the mistake, and asks the credit bureau to remove the negative mark. 

  • They can correspond with creditors and the credit bureau on your behalf for months. 

Rarely the credit bureau agrees right away, so the credit repair company communicates with them and provides all the necessary information.

  • If rejected, they may try to find another mistake. 

However, this is rare; more often than not, after a rejection from the credit bureau, they will just let you know that the credit repair was unsuccessful. You will also be notified if everything works out and the credit bureau removes the negative mark.  

Note that you can do all of the above for free if you have the time, inclination, and knowledge to do it yourself.  

What is the Credit Repair Organizations Act?

The federal CROA is essentially a 1996 regulation that establishes the rules for such companies on a legal level. It contains all the nuances of cooperation with clients, and if you don’t comply with them, your credit repair company will violate federal law. 

Knowing these rules, you can quickly identify fraudsters because no honest and reliable organization will not violate them. For example, these things are prohibited in the credit repair industry: 

  • Guarantee customers results before they start working.
  • Advise clients to lie to credit bureaus or change their identity to avoid paying off old debts. 
  • Charge users for services before they have been fully provided. 

At the same time, such organizations must: 

  • Warn customers that they can send credit bureaus on their own and free of charge. 
  • Explain to users that if a credit repair company violates CROA, they have the right to sue. 

You can find all the instructions from reliable organizations about how credit repair works and how to do it yourself without the help of specialized companies. 

​​How Much Does Credit Repair Cost?

Credit repair services are costly because they are not paid on a fixed basis but by the months the process lasts. Since it can take several years to appeal a mistake, the total cost can be as high as a few thousand dollars. 

The credit repair industry works under different payment schemes: 

  • Monthly fee. 

In this case, you pay once every 30 days for the services provided in the previous month. Credit repair companies charge a monthly fee of $50 to $200.

  • Pay per delete. 

In this case, the company only asks for payment when a negative mark has been removed from your credit reports due to their efforts. You will need to pay about $300 for each deleted item.  

Try to choose credit repair companies with the second payment type because they work for results. With organizations that work on a monthly fee, you cannot be sure they are not stalling to get more money from you.   

How Long Does it Take to Rebuild Credit?

Unscrupulous credit repair companies may promise to increase your credit score in 30 days, but let’s face it, this is not true because, officially, the credit bureau has 45 days to respond to a letter of dispute. So how long does the credit repair process take, then? 

It all depends on your situation. If you have a bankruptcy mark on your credit reports, then even with credit repair services, you will need 5 to 10 years to recover from it. If the decrease in credit score results from a lender’s error who misstated some data on your credit report, rebuilding credit can take only a few months. 

One thing we can say for sure is that the higher your credit score was, the longer it will take to recover. If you want to make a significant purchase and take out a loan, start working on improving your credit score 6 to 12 months in advance. 

Guide to Choosing the Best Credit Repair Company

There are several factors you should consider when choosing a credit repair company: 

  • Services. 

Think about what kind of credit repair services you want. For example, do you want free credit monitoring? Is identity theft protection or debt management plans crucial to you? The answers to these questions can help you decide which companies are right for you.

  • The number of monthly disputes. 

Download your credit reports and see how many negative marks are on them. Think of each item as at least one dispute. Choose the total number of monthly disputes according to this number, or go to the company with no restrictions on this criterion. 

  • No Guarantees. 

According to the CROA, companies can’t give you any guarantees, so don’t do business with someone who promises to improve your credit score with a 100% guarantee. 

  • Payment Schemes. 

Most companies have a monthly fee plan, which is not very profitable for you as a user because you might pay for no results. If you have the opportunity, it is better to choose organizations that work with pay-per-result; this scheme is called “pay per delete.” 

If you have already found a credit repair company you want to work with, check whether it is legitimate: 

  • Read reviews on independent websites. Be sure to check that there are negative reviews because every company has unsatisfied customers; if there are none, you can say it is a purchased review. 
  • Read the rules set forth by the CROA. According to it, companies must only charge you for fully rendered services, explain your rights and options, and make no guarantees. If the organization does not adhere to these rules, do not contact them. 

5 Signs of Scam Credit Repair Company

Before paying for credit repair services, check the company for these five red flags: 

  • The company suggests you lie to the credit bureau or make changes to your personal information to lose touch with your debts. 
  • The organization asks you to pay for a package of services before you start. 
  • The company staff refuses to terminate the contract at your request (you can do so without charge for the first three days of cooperation). 
  • The company employees say that you can’t do what they will do on your own – for example, send you letters of dispute. 
  • The company guarantees you the result in 1-2-3 months, even before you start cooperating. 

When Should I Use a Credit Repair Company?

Of course, you can always deal with your negative marks yourself – there are many articles and videos on the Internet with instructions on this topic. However, you can delegate the credit repair process to professionals if you don’t want to waste your time or nerves on it. 

To decide whether you should apply for credit repair services, answer these questions: 

  • Are you willing to spend $300 to $3600 for the services of such companies with no expectation of results? 
  • Are there errors on your credit reports that need to be corrected? If not, the chance of getting a positive result is meager; you may just be wasting your money. 
  • Do you have a lot of negative marks and accounts that you can’t deal with on your own? 
  • Do you want a new loan for a big purchase in the next 6-12 months? 
  • Have you tried sending letters of dispute to the credit bureaus? 

If the answer to all or most of these questions is yes, you should contact a credit repair company. Otherwise, you can handle the task and save hundreds of dollars if you have the time and inclination.

Debt Settlement vs. Credit Repair vs. Credit Counseling

Often, users confuse these three radically different concepts. So that you can accurately determine which company you need, we have compiled a small table comparing them to each other:

  Credit Repair Credit Counseling Debt Settlement
What is the organization’s primary goal? Help people improve their credit scores by removing negative marks on your credit report. Help you learn to manage your finances, pay off all existing debts, and stay out of new ones. Help you stay out of debt or some part of it by negotiating with your lender.
What kind of organization is it? It is a private organization that may operate without a license but must comply with the Credit Repair Organizations Act. It is usually a non-profit organization that provides adult financial education. It is a private organization that negotiates on your behalf.
Can you do this task yourself? Yes, you can do all of this on your own and for free. Yes, but only if you spend a lot of time and effort studying the information on the subject. However, this is where a professional’s perspective can make a big difference. Yes, you can negotiate directly with the lender.
How much do such services cost? Companies often work on a monthly subscription basis; their price is between $50 and $100. Some organizations charge about $300 for a one-time fee when they succeed in removing a negative mark from your credit report. The first consultation is most often free. Next, you also pay either a monthly fee or a package of services (such as a credit management plan). You don’t pay anything upfront if you go to a trustworthy company. However, once the organization has settled your debt, you will have to pay them up to 50% of it.
How long does the process take? Removing negative information can take anywhere from 6 months to 3 years. The process can take up to several years, but the result will lead you to a life without financial stress and debt. The process can take anywhere from 2 to 5 years.
Does the process affect my credit score? Contacting a company like this by itself will not affect your credit score. If they can remove the negative information from your credit report, your credit score will go up. No, using a credit counseling agency will not change your credit score. But your credit score may decline if you take out a debt consolidation loan or do something else the counselor told you to do. Yes, the debt settlement mark will remain on your credit report for seven years.

FAQ

How much does credit repair usually cost?

Such services typically cost between $50 and $100, but some companies charge as little as $200 per month. It is also important to note that some organizations work on a pay-per-delete basis, meaning you must pay for their services only if the negative mark is removed. In that case, the price is fixed and can be from $300 to $500.

Is paying someone to fix your credit worth it?

You can do almost everything these companies do for free; the only question is whether you have the time and inclination to do it. If you are unsure if you want to spend money on credit repair services, you can try to remove one of the marks yourself with the help of instructions from the Internet and see if you need help from experts.

Do you have to be certified to do credit repair?

Such companies and experts may work without a license, specialized education, or certificates, so it is sometimes challenging to distinguish scammers from excellent professionals. If you don't want to fall into the hands of liars, check to see if this company operates under the Credit Repair Organizations Act (CROA).

What is the best credit repair software?

If we were to single out the three best credit repair software, we could tell you: Credit Versio is best for individuals. Dispute Bee is best for businesses. Credit Repair Magic is an excellent option for people who want to try credit repair for the first time.

Do credit repair companies really work?

The answer to this question depends on the specific company and your request. If you have errors on your report, you can clean them up yourself or turn to any company – they can handle the task. If you want such a company to correct your credit score magically, you will lose money.

What is the fastest way to repair your credit?

The easiest way to improve your credit score is to lower the credit utilization rate to at least 30 percent of your available credit limit. Then, for example, you can pay off credit card debt or pay back old credit. This way, you will show creditors that you can manage without credit and that you are a reliable borrower who pays your debts.

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