Nearly everyone has been there – you finally get around to opening your latest credit card bill, and then you collapse in shock!
Credit card balances can rise before you know it, and if you keep making timely payments, your limit will probably increase.
Then you’ll get a really attractive offer for another card, and then before you know it, you have several cards that are close to maxed out.
Late payments and over-limit charges can adversely affect your credit, as can missed payments and high balances. Before you know it, your credit score has plummeted, and you don’t know how to fix your score.
A reputable credit repair company may be able to help you with your dilemma, especially if you have items on your credit report that shouldn’t be there. Sometimes, items end up on your credit report because of fraud, but sometimes it’s just clerical error.
Be prepared, though, to provide backup paperwork for everything that you contest with the credit bureaus or your credit repair company.
Although most credit repair companies are good, some aren’t. It’s essential to know which credit repair questions to ask when you decide to hire a credit repair company because you want a company that can help you get back on track.
How Do Credit Repair Companies Work?
Your First Consultation
When you interview a credit repair company, they should immediately pull your consolidated credit report. What this means is they pull a combined credit report with all three of the major bureaus.
This helps them to know what you need and where they should start.
It’s possible they won’t be able to help you, and they should let you know if that’s the case. When the company pulls your report, it won’t put a negative mark on your credit, so you shouldn’t worry about that. The pull is what they call a “soft pull”.
Your consolidated credit report will include all three of the major credit agencies, which are Experian, Equifax, and TransUnion.
Usually, there’s no charge for this evaluation, and there shouldn’t be if the company is reputable.
Identify Accounts To Dispute
You’ll be assigned to a credit repair team, and they’ll help you review your credit reports for errors. This can take several days.
They’ll be looking for items such as duplicate account listings, expired negative listings, and the accuracy of your payment history.
Any errors will be identified, they’ll need any backup documentation to support your claims, and then they’ll start working with the credit bureaus to clean up your credit report.
They’ll need to work with each credit bureau individually, so it may take longer than you’re expecting.
Do All Credit Agencies Have The Same Information?
No. Not every creditor reports to all three agencies, although some may.
Usually, a business will have a contract or agreement with a particular credit agency, and they’ll report their account data exclusively to them.
This is called data furnishing.
For this reason, it’s essential that your credit repair company pull your consolidated credit report or an individual report from each credit bureau.
You’re entitled to a free annual copy of your report from each credit bureau.
Can I Do What Credit Repair Companies Do?
The answer is yes, but you definitely do not want to. A professional company will know the credit repair questions to ask, and they’re skilled at negotiating with the credit bureaus.
Although you can do this yourself, it’s VERY time-consuming and it’s stressful. Your time is valuable, and for the price they charge, it just makes sense to outsource this.
It also requires dedicated follow-up to ensure that issues have been addressed by the creditors. Unfortunately, it’s not a simple process.
The credit repair company will have to contact your creditor, who will have to research information and get back to them.
Your credit repair representative will have to follow up and considering all the clients they probably have, it will take a while.
Sometimes your issues will need multiple follow-ups before they’re fixed.
Hiring a professional credit repair company may ultimately be more cost-effective than trying to repair your credit on your own, especially when you consider that your time has value.
Is It Really Worth My While To Hire A Professional Credit Repair Company?
Absolutely. Credit repair companies must be licensed by the state or states where they operate, and they use attorneys who specialize in credit law and its many intricacies. If your credit report has many negative items like late payments, several closed accounts, evictions, and hard inquiries you don’t want to be guessing on what to do. You want a professional with the skill to take action.
This means that the credit repair company will be more effective at disputing information on your credit report. They’re also knowledgeable about special provisions in consumer protection laws that can help you raise your credit score and improve your credit history.
A professional credit repair company will also provide insight on your credit score and how it’s determined as well as methods for boosting your credit score. They’ll be able to explain items and terms on your credit report and answer any credit repair questions you may have.
What Credit Repair Questions Should I Ask To Make Sure The Company Is Legitimate?
If the company you’re speaking to is legitimate, they won’t do any of the following:
- Ask you to pay upfront before they have done anything.
- Charge you for the first consultation.
- Recommend that you dispute something that’s correct, even if it’s negative.
- Suggest that you provide false information when you apply for a loan or any type of credit.
- Neglect to advise you of your legal rights when they explain how they can help you.
If the company you’re interviewing does any of these things, then don’t hire them. They work for you, and it’s essential that they’re reputable and not running a scam.
The Better Business Bureau doesn’t accredit credit repair companies, so if they tell you otherwise, they’re not being honest with you.
What Do Credit Repair Companies Charge?
The rate charged by a credit repair company will vary depending on the amount of work they do and the services you request.
The fee for the following service plan could range from 30 dollars monthly to 100 dollars monthly, and potentially a small setup fee – which is standard in the industry – could be from 15 dollars to 90 dollars as a one-time charge.
Sample service plan:
- Consolidated credit-bureau monitoring
- Credit score simulations
- Fraud alerts and protection
- Insurance for identity theft
- Referral to a mortgage lender and counseling on housing
- Alerts for credit score changes
- Financial education and counseling
It is definitely less expensive to fix your credit yourself, but if your time is valuable, then it may be more cost-effective to hire a professional. This will save you literally hundreds of hours.
Cell phone apps are available that will monitor your credit and have built-in action items that allow you to file a dispute with a creditor. Usually, there’s a monthly subscription fee for these apps, and it runs from about 10 dollars monthly to 30 dollars monthly.
Cleaning up your credit report is a must if you’re planning on a major purchase such as a car or house, but it will benefit you in other ways also. Many insurance companies base your annual rate on your credit score.
Most prospective landlords now run a credit report, and if your score is very low, then they may not rent to you, or they may require an excessive deposit.
Even though your payment history should have nothing to do with your insurance or renting a car, it does.
Making sure your credit report is clean and your score is as high as possible can save you a lot of money over time.
If It Sounds Too Good…
As with anything else, if a credit repair company sounds too good to be true, it’s probably not legitimate and can cause you a considerable amount of trouble.
There is no point in guessing. There are many reputable credit repair companies that we have listed that are solid in regards to repairing credit.
Is Paying Someone to Fix Your Credit Worth It?
Paul Martinez is the founder of BendingDestiny.com. He is an expert in the areas of finance, real estate, and eCommerce.
Join him on BendingDestiny.com to learn how to improve your financial life and excel in these areas. Before starting this blog, Paul built from scratch and managed two multi-million dollar companies. One in the real estate sector and one in the eCommerce sector.