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Key takeaways
- Credit repair may offer faster dispute resolution, expert analysis and the potential for score improvement.
- Approach credit repair with realistic expectations, as there’s no guarantee of specific results.
- Alternative strategies such as self-dispute, credit counseling and debt repayment plans can also contribute to credit improvement.
- Your credit score holds power over your financial opportunities, from securing loans to determining interest rates and even insurance premiums.
From securing low-interest loans to obtaining favorable insurance premiums, a strong credit rating opens up a world of financial opportunities.
“A good credit score can help you buy a home, get a business loan or finance an education,” says Andrew Smith, director of the Federal Trade Commission’s Bureau of Consumer Protection. But if you’ve faced financial challenges, your credit score could be dragging you down.
You may have considered credit repair as a possible solution, but it isn’t the right choice for everyone. Evaluate the benefits and drawbacks before making a decision.
What is credit repair?
Credit repair is the process of improving your credit score by addressing negative or inaccurate items on your credit report. These could include errors, outdated information or valid derogatory marks, like late payments or collections.
You can take a DIY approach or hire professionals, including credit counseling agencies or credit repair companies. These services may dispute inaccuracies, negotiate debts or develop a custom plan to help you raise your score over time.
Does credit repair work?
Yes, it can — but results vary. Correcting errors and outdated items may improve your score, especially if they’re weighing it down.
A study by Consumer Reports found that 44 percent of people who could access their credit reports found at least one error. If you fall into this category, credit repair may be a good option. Whether credit repair succeeds depends on several factors, including the accuracy of the information being disputed, whether credit bureaus and creditors are cooperative and how much effort you make to improve your financial health and habits.
Pros of credit repair services
Credit repair services may help lighten your financial workload. The right company can save you time, reduce hassle and potentially help you improve your credit score.
A credit repair company can deliver quick results
Engaging a reputable credit repair company can expedite the process compared to navigating it on your own. Professional expertise allows for efficient identification and resolution of credit issues, potentially saving you time and hassle.
You’ll get an expert credit report analysis
Credit professionals possess the knowledge and experience to thoroughly review your credit reports and identify the factors that contribute to a lower score. This insight is invaluable in understanding the root causes of credit challenges.
There’s potential for credit score improvement
When combined with strategies to improve your credit habits, credit repair can lead to a boost in your credit score over time. A clean credit report opens doors to better financial opportunities and lower interest rates.
This process will also likely help you understand your credit score better so you can keep making decisions that boost it.
Cons of credit repair services
Before hiring a credit repair company, it’s important to weigh the potential drawbacks — including cost, limitations and risk of scams.
No guaranteed results
Working with a credit repair company doesn’t guarantee a specific outcome. While improvements are possible, there’s no assurance that your credit score will increase substantially or meet your desired level.
If you currently have a bad credit score, you’re unlikely to jump all the way up to an excellent credit score. Depending on your situation, you might not make much positive progress, if any.
It costs money
Engaging a credit repair company involves various fees, which can vary widely depending on the company and the breadth of services they provide. Here’s a breakdown of typical charges:
- Initial setup fee: Federal law prohibits credit repair companies from charging upfront fees. However, many charge an “initial setup fee,” which may range from $19 to $200.
- Monthly subscription: For ongoing services, credit repair companies typically charge between $50 and $150 per month.
The amount you pay will vary depending on the services you purchase. These may include:
There is a risk of scams
Not all credit repair companies operate ethically, and some may engage in deceptive practices. Research and vet any company thoroughly to protect yourself from debt relief and credit scams.
Alternative ways to repair credit
Rather than paying for credit repair services, consider lower-cost or free alternatives.
- Dispute credit report errors yourself: Request your credit reports for free from AnnualCreditReport.com and dispute any inaccuracies with the relevant bureaus.
- Get credit counseling: Nonprofit agencies can help you create a realistic budget and debt management plan.
- Repay debt: Pay down balances using methods, like the debt snowball and debt avalanche strategy. Reducing your credit utilization can raise your score over time.
- Consolidate debt: Consider a debt consolidation loan or home equity solution to simplify high-interest debt repayment.
Bottom line
Improving your credit is a practical decision that can have long-lasting benefits. Before you decide how to move forward, consider the pros and cons of credit repair companies and explore alternative approaches. This can help you make an informed decision.
While credit repair services can provide assistance, it comes at a cost and they can’t promise measurable results. Ultimately, aim to choose the solution that best aligns with your financial goals.
Frequently asked questions
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