How Do Credit Repair Companies Work?

Considering hiring a credit repair company? Maybe your credit is in shambles, and you’re tired of being denied for loans and credit cards. Or you need to make a big-ticket purchase, like a new home, and the transaction is contingent upon your improving your credit score. 

A reputable credit repair company can lend a helping hand. But before you sign up for services, it’s ideal to understand what they do and how they work. You should also evaluate your options to ensure the company is the best fit to help you meet your credit goals.

What Credit Repair Companies Do

Credit repair companies address inaccurate or untimely information that’s present in your credit report. When you sign up for services, the credit repair company typically pulls your credit report from the 3 credit bureaus – Equifax, Experian and TransUnion. They review the entire report to identify inaccurately or untimely entries that are dragging down your credit score. 

If you agree with their findings, they will proceed to send dispute letters to both the creditors and credit bureaus to have the items rectified or removed. The credit bureaus will reach out to the creditor for a response. They have 30 days to reply or the information must be removed from your credit report. 

Creditors have a responsibility to prove the information in your credit report is up to date and actually belongs there. If they can’t verify that what they’re reporting is correct and not past the reporting timeline, it must be removed. This is how credit repair companies get results – they put the burden of proof on the creditor to prove that the information should be there. Even if the information is correct but the creditor can’t prove you owe the debt, it still has to be removed. 

Keep in mind that disputing accurate and timely information is illegal and could mean bad news for you as you work to repair your credit. The credit bureaus could flag your disputes as frivolous and toss them out. And if the items are removed because the creditor doesn’t respond in time, you may find that they reappear on your credit report once they do reply to the dispute. 

How Much Does Credit Repair Cost? 

Expect to pay $60 or more per month, depending on the level of service you select. You may also be charged a first work fee for the credit repair company to access your credit reports and create an action plan. Review fees carefully and we wary of high fees or anything that seems too good to be true. Read the fine print.

Should You Hire a Credit Repair Company? 

It depends. Does the thought of repairing your own credit seem overwhelming? Or maybe you’re strapped for time and don’t know where to start? Hiring a credit repair company to do the work for you may be an option. 

However, credit repair is something you can do on your own if you have time. According to the Federal Trade Commission, “some people hire a company to investigate for them, but anything a credit repair company can do legally, you can do for yourself at little or no cost.” 

How to Avoid Credit Repair Scams 

Prefer to let the professionals handle credit repair for you? You want to do your due diligence to avoid credit repair scams. There are laws to protect you from predatory credit repair companies. To illustrate, the Credit Repair Organizations Act that allows you to cancel your services within a 3-day window without incurring any charges. 

The FTC suggests that you avoid credit repair companies that demand payment before services are rendered, tell you not to reach out to the credit bureaus or encourage you to file fraudulent disputes. You should also avoid companies that encourage you to falsify information for credit applications or fail to disclose your legal rights and how they can assist you. 

A Simple Way to Improve Your Credit Health

If you want to try repairing your credit on your own, access a free copy of your credit report from the 3 bureaus. Review each report in its entirety and identify errors and untimely information. Devise a plan of action to address the items and be persistent with your efforts until you get the results you want. 

In the meantime, you can add positive payment history to your credit report. It accounts for 35 percent of your credit score. The more timely payments that are reflected, the better for your credit health. 

Consider the Credit Builder Loan from MoneyLion to lend a helping hand. It’s a loan product that gets you cash in hand while building your credit health. There are no credit checks, and it only takes a few minutes to apply for consideration.

You could be approved for up to $1,000 if you have a checking account that’s at least 60 days old and in good standing, along with a verifiable income source. 

Get started by downloading the MoneyLion app, customizing your profile, linking your bank account and submitting the application. If approved, the loan proceeds will be deposited into your bank account within minutes. MoneyLion may withhold a portion of the loan in an interest-earning Credit Reserve account, but the funds will be released to you once the loan is paid in full. 

The affordable monthly payments are automatically deducted from your bank account, so you won’t have to worry about late fees and penalties. Payments are also reported to the credit bureaus and help build your payment history. 

See if you qualify for a Credit Builder Loan.