Can I Pay Someone to Fix My Credit?

Millions of Americans must deal with wrong information on their credit reports every year. Many of them hire someone to deal with it.

That can be a colossal waste of money.

Credit repair companies can’t do anything that you can’t do yourself. And some want you to believe they can erase all your credit problems.

They can’t.

What Is Credit Repair—and What Can You Do Yourself for Free?

Credit repair is like car repair. You notice something wrong with your vehicle – oil leak, busted headlight, engine overheating – and hire a mechanic to fix it.

With credit repair, you notice something wrong with your credit report – unauthorized charges, stolen identity, incorrect dates – and hire a credit repair company to fix it.

There is one considerable difference. Unlike most car repairs, you can spot credit problems and correct them yourself. For free. And those problems are usually a lot easier to fix than a blown head gasket.

Credit repair should not be confused with credit counseling. With repair, the agency you hire will try to clean up wrong information on your credit report.

Credit counseling agencies do the same, but it’s just the first step. They also have counselors who’ll review your financial habits and try to teach you how to manage your money.

What Credit Repair Companies Can – and Can’t – Do

Credit card repair companies often talk a big game, with catchphrases like “Patented credit score restoration technology” and “Free credit score and credit report summary.”

There is less there than meets the eye. Far less!

Credit repair companies can’t scrub valid negative information from your credit reports. They can monitor your credit information and dispute incorrect charges, but you can also do that if you have the time and inclination. A lot of people don’t, and credit repair companies are forever grateful for that.

What They Can Do

Credit repair companies can identify incorrect information on your credit reports. They can dispute that information with the credit bureaus. They can monitor your credit reports for errors and offer educational resources that might help you build good financial habits.

What They Cannot Do

Credit repair companies often claim they can “fix” your credit score. Many people assume that means they can remove negative information. They can’t – if the information is legitimate.

If you had a late payment on a credit card, a credit repair business is not going to get it scrubbed from the record.

Credit repair companies cannot promise your credit score will increase by a specific amount. And they cannot charge you upfront fees. You don’t have to pay until the promised services are successfully completed.

Typical Costs and Legal Protections

Most credit repair companies work on a subscription basis. You pay a monthly fee, just like you would for a streaming service. Only it costs a lot more than Netflix and isn’t nearly as entertaining.

Monthly fees typically range from $25-$150. There is also a non-refundable setup fee. That can set you back $120-$300.

Credit repair companies also offer a “pay-per-delete” option. Instead of blanket coverage, the company will dispute individual items you want challenged.

Fees vary, but expect to pay about $25 for smaller challenges, like incorrect personal information. A late-payment dispute costs about $50.

This a la carte approach can be a good choice if you don’t expect many challenges. But they can easily exceed the flat monthly fee if you run into a mess of disputes.

And don’t forget, you’ll be charged for the challenge whether it’s successful or not.

All this can make people skittish about hiring a credit repair company, but there are protections. The Credit Repair Organizations Act (CROA) prohibits up-front charging, requires clear contracts, and gives consumers three days to cancel the contract if they have second thoughts.

Is Hiring a Credit Repair Company Worth It?

Hiring a credit repair company can be worthwhile if you feel overwhelmed by questionable information on your credit reports. It’s their job to get to the bottom of such situations.

That would be the “pro” for hiring one, but there are cons.

The drawback is you can do everything a credit card repair company does and do it a lot cheaper. Unlike some credit repair companies, there’s little chance you’ll scam yourself.

Pros of Hiring a Credit Repair Company

Hiring a credit repair company can save you time. Their representatives will do the legwork, like flagging errors and filing disputes. That will allow you to pursue more important or enjoyable activities. It can be a real time-saver if you routinely have a long list of suspicious items on your credit reports.

Hiring a credit repair company can also lower your anxiety level, since the company should know all the ins and outs of the credit dispute game.

Cons of Hiring a Credit Repair Company

Hiring a credit repair company isn’t cheap, at least compared to the alternative. Initial set-up fees can be more than $200, while monthly fees might reach the $150 range. The alternative is doing it yourself for free.

There is no guarantee your dispute will be successful. Win or lose, you must pay the credit repair company for trying.

And the credit repair industry has more than its share of scammers promising whiz-bang results. Despite the allusions, credit repair companies cannot remove legitimate negative items from your credit reports.

How to Repair Your Credit Yourself

People hire credit repair companies to improve their credit scores. No matter who does it, all the credit monitoring and disputes are just means to that end.

If you are properly motivated, you can reach that end without spending money on a credit repair company. Here’s how.

1. Obtain and Review Credit Reports from the Three Bureaus

The three credit bureaus are Experian, Equifax, and TransUnion. Each has step-by-step instructions on how to dispute errors on their websites.

They are legally obligated to let you see your credit reports once a week. You can contact them individually or go to AnnualCreditReport.com and request your reports.

2. Identify and Dispute Inaccuracies

Once you have your reports, check them for errors. The most common are incorrect charges or payment information, closed accounts being listed as open, and identity theft.

If you find an error, contact the credit bureau. All three of them have credit dispute services that are relatively easy to use. It’s also a good idea to send a dispute letter by certified mail, listing the specifics of your case. That way you’ll have a paper trail to fall back on if your dispute is disputed.

3. Bring Accounts Current

Bad financial moves kill a credit score, and one of the worst is not paying your bills on time. Or worse, not paying them at all.

Bringing your accounts “current” simply means paying what’s due, whether it’s minimum payment or the full amount. If you can’t manage that, contact the creditor and try to work out a settlement or enroll in a hardship program.

4. Set Up Autopay

Virtually all financial institutions offer autopay to customers. Simply pick a date every month when your bills are automatically paid.

Do that, and you’ll never have to worry about missing a payment. Just be sure you have enough money in your account to cover such charges.

5. Maintain Low Credit Utilization

The second most important factor determining your credit score is credit utilization ratio, accounting for 30% of the score. It is the percentage of total available credit you are using.

For example, if you’re carrying $2,000 on a credit card with a $4,000 limit, your credit utilization is 50%. That would not be good.

The lower the utilization ratio, the better. Anything above 30% will detract from your credit score.

6. Pay Off Debt Strategically

It always pays to have a plan, and there are two main ones when it comes to paying off debt.

With the “debt avalanche” approach, you pay off debts based on their interest rates, with the highest going first. Mathematically, this makes more sense since you are eliminating the more expensive debt quicker. But it takes discipline and patience, since larger debts obviously take longer to escape.

With the “debt snowball” method, you pay off the smallest debts first and work your way up. This is a better tactic if you’re the type that needs quick results to stay motivated.

7. Avoid Unnecessary New Credit

Opening a new credit account requires a “hard inquiry.” That will cause a temporary dip in your credit score. It also lowers the average age of your credit accounts, which is another negative.

Opening new credit increases your total credit limit, which will make it easier to maintain an acceptable credit utilization ratio. But on balance, you’re better off avoiding new credit offers.

8. Keep Unused Accounts Open

Getting rid of credit accounts that you don’t use may de-clutter your financial life, but it’s not necessarily healthy for it. An unused credit account increases your total available credit and lengthens your credit history. Both will boost your credit score.

9. Use Secured Credit Tools

Secured credit is basically when you pay money up front to a creditor before using it. With secured credit cards, you make a cash deposit that’s usually the amount of your credit limit. They are like debit cards, except your payments are reported to the three credit bureaus.

With a credit-builder loan, you take out a loan for a fixed amount. But instead of getting the money right away, you start making monthly payments. Once they reach that fixed amount, you receive the money.

Secured credit tools are easier to get for high-risk borrowers since the creditor isn’t risking any money. They are a good way for new borrowers to establish a positive credit history.

10. Get Credit Counseling from Reputable Nonprofits

Good advice is helpful in any situation, but all advice is not created equally. Credit repair companies often offer financial counseling. Just make sure it’s legit.

Nonprofit companies like InCharge Debt Solutions have certified advisors who can set up plans that help you get out of debt.

Timeline for DIY Credit Repair

Once filed, it usually takes 30 to 45 days for a do-it-yourself credit dispute to be resolved. That’s set by the Fair Credit Reporting Act, so you have the law on your side when it comes to deadlines.

Gathering and reviewing credit reports usually takes about a week. Preparing and sending letters of dispute might take another week.

Once the credit bureau receives the letter, it has 30 days to investigate. That can be extended to 45 days in some circumstances.

If you win the dispute, the bogus information will be fixed. If the disputed information is legitimate, you’ll have to deal with it.

Negative items can stay on your credit report for seven years. A Chapter 7 bankruptcy will stay there for 10 years.

Red Flags and Scams

When it comes to honesty and delivering on promises, the credit repair industry might have a worse reputation than the U.S. Congress. But just as all politicians aren’t crooks, not all credit repairmen and women are unethical.

If you want to avoid credit repair scams, the Federal Trade Commission and Consumer Financial Protection Bureau says to be wary of the following tactics.

• You are pressured to pay upfront fees.
• You are promised that negative information will be removed from your credit report.
• You are advised to dispute all information on your credit report, even if it is accurate.
• You are told not to directly contact a credit bureau.
• The company refuses to tell you what credit repair steps you can take on your own.
• The company tells you to create a new credit report by applying for an Employer Identification Number (EIN) instead of using your Social Security number.

When It Makes Sense to Get Help – and How to Choose Wisely

Assuming you’ve found a credit repair company that has no red flags, take a deep breath and ask if the services it offers are worth the cost.

It’s hard to put a monetary value on anxiety. If your credit situation is chaotic and it will relieve stress to hire someone to do a job you can do yourself, go for it. Just review the contract to make sure you know your rights and obligations. And remember, the CROA gives you three days to change your mind after signing a contract.

Is Credit Repair in Your Future?

Studies estimate that 20%-44% of credit reports contain incorrect information. So chances are, some sort of credit repair is in your future.

The question is whether you do it yourself or hire a credit repair company. If the company is legitimate and you feel overwhelmed by the repair process, you should consider hiring someone. But the process isn’t as daunting as credit repair companies would like you to think. And they can’t remove negative information that is correct.

Monitoring your financial transactions personally is a good habit to begin with. If you spot something fishy on your credit report, you can dispute it on your own.

And best of all, it won’t cost you a dime.