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If you’re struggling with bad credit, you may stumble upon credit repair companies that boast the ability to clean up your credit report. These companies often target consumers with less-than-stellar credit and debt, hoping to acquire your business when you’re down on your luck.
While signing up for a credit repair service can seem like a simple solution to your credit issues, these companies charge fees that can put you in more of a predicament. With just a little research and time out of your schedule, you may find you can easily dispute errors on your own at no cost.
Before you work with a credit repair company, consider exactly what they offer and at what cost, as well as how you can clean up your credit for free.
Credit repair is the process of hiring a company to fix your bad credit through the removal of inaccurate, negative information on your credit reports.
A credit repair company works on your behalf to remove this information by communicating with the credit bureaus (Experian, Equifax and TransUnion) and/or financial companies, like your bank or a debt collector, to dispute the errors.
There can be a lot of back and forth, but the end goal is to have negative information deleted from your credit file so your credit rating improves.
Credit repair companies don't help you manage your money, which is a different service offered by credit counseling companies like the National Federation for Credit Counseling (NFCC) and the Financial Counseling Association of America (FCAA).
Credit repair services aren’t free, but you won’t incur a fee until services are delivered. Fees are charged in one of two ways: monthly or per item removed from your credit report.
Monthly subscriptions charge you for services provided during the previous 30 days, while the latter only charges you once info is removed from your credit file. The exact fees vary by service, but they can add up to hundreds or thousands of dollars every year.
Credit repair services aren’t always reliable or truthful. In fact, the CFPB found that more than half of people who submitted complaints about credit repair companies cited “fraud or scam.”
Thankfully, there are consumer protections. If you opt to use a credit repair company, you’re protected under the Credit Repair Organizations Act (CROA), which regulates how these companies can operate. Some key points include:
- Consumers have three business days to cancel a contract without charge.
- Companies can’t guarantee that they can remove information from your credit reports.
- Companies can’t advise you to make false statements or change your identity to prevent the credit bureaus from associating information with you.
- Consumers can’t be charged any fee for services that haven’t been fully rendered.
Before signing up for any credit repair service, make sure they follow the CROA rules and look out for possible red flags, such as payments being demanded upfront or results that sound too good to be true. The CFPB lists more ways to avoid being misled by credit repair companies.
And better yet, dispute any errors on your credit report on your own. There is no fee to clean up your credit and you’ll avoid misleading companies that may take advantage of your poor credit standing. Remember that even if you pay to have information removed from your credit report, there's no guarantee that it'll boost your credit score.
If you want a costless way to tidy up your credit, here are four steps you can follow.
- Request your credit reports: The first step in cleaning up your credit is to pull your credit reports from the main three credit bureaus — Experian, Equifax and TransUnion. You can receive weekly free credit reports from each credit bureau now through April 20, 2022 by going to AnnualCreditReport.com.
- Review your credit reports: After you request your credit reports, look through each one and verify that the information listed is accurate. Check for discrepancies with your personal information (like name and address), account information (like balances, credit limit, payment history) and bankruptcy and collection data (if your info was sent to a collection agency).
- Dispute credit report errors: If you find any errors on your credit report, start a dispute as soon as possible. Check out our step-by-step guide on how to dispute a credit report error.
- Pay off any debts: Carrying a balance on your credit card can result in a lower credit score and high interest charges. It’s in your best interest to pay off debt quickly so your credit can improve. CreditWise® from Capital One is a free tool you can use to simulate how paying off debt will better your score. Learn how you can pay off credit card debt.