What do credit repair companies do? A credit repair company, also called a credit services organization, is a third-party financial institution that works with consumers to rectify credit problems and identify/fix inaccurate or unverifiable information on their credit reports. The goal of working with a credit repair company is for consumers to improve their credit history and overall credit score, which can open up benefits like better deals on loans, saving money, lower insurance premiums, and more!
Services Offered by Credit Repair Companies
How do credit repair companies work? Credit repair organizations offer several types of services designed to help consumers understand their credit reports and learn how they can improve their credit scores. Some common services credit repair companies can offer include:
- Credit assessment and analysis: To start, the credit repair company will take a look at your most recent credit report and talk to you about your financial situation and habits. Using this information, they can then give you individual credit counseling advice on things you can do to improve your reports.
- Credit score monitoring: While you can monitor your credit report on your own, your credit repair company can also help you monitor your reports and point out errors or behaviors you can change to help improve your credit.
- Communicating with creditors: Your credit repair company can communicate with your creditors on your behalf, so you don’t have to!
- Identity theft monitoring: A credit repair company can look for suspicious activity, like financial accounts in your name that you didn’t open, that may indicate identity theft.
- Credit-building tools: Depending on your situation, your credit repair company may suggest credit-building tools like secured accounts or becoming an authorized user.
- Debt negotiation: Credit repair companies may talk to lenders or other creditors to negotiate your debt and possibly lower the amount you owe or give you more time to pay.
- Educational resources: Many credit repair companies offer educational resources, such as online classes, blogs, financial calculators, and other tools, to help you better understand your credit history and manage your finances.
Understanding The Components Of Credit Reports
Your credit report is a summary of your financial behavior and history. The data included in your credit report can be broken down into the categories listed below.
Personal Information
Your personal information will be the data that can identify you as a citizen and a consumer. This info will include your:
- Full name
- Address
- Social security number
- Date of birth
- Employment information
While this information isn’t used to calculate your credit score, it’s necessary to identify you and ensure that your report contains the correct data.
Credit Accounts
Your credit accounts include but are not limited to:
- Credit cards
- Mortgages
- Car loans
- Personal loans
- Student loans
Each account will list the creditor’s name, account type, the date the account was opened, the credit limit or loan amount on the account, the account’s current balance, and the payment history. Your credit accounts will show how much you owe, how much credit you’ve taken out, and how on time you are with repaying those credit accounts.
Credit Inquiries
Credit inquiries include all your applications for loans, credit cards, or other lines of credit. When you apply for these kinds of funding, the lender will pull a hard credit check, which will be documented on your credit report. These hard inquiries can slightly lower your credit score and can remain on your report for up to two years. And so you’ll want to avoid excessive credit applications so you don’t lower your scores unnecessarily.
Public Records
Your public records will contain your payment history, which shows how on time you are with making payments on your bills, loans, and other financial obligations. These records will also include any accounts that have been sent to collections or labeled as a charge-off. These public records will be extremely influential in determining your overall credit score.
Credit Score
The information on your credit report is taken into account to determine your overall credit score. Your credit score is a three-digit number financial institutions use to determine a consumer’s creditworthiness or financial risk. Consumers with higher scores are considered a lower risk and are, therefore, more eligible for higher loan amounts, lower interest rates, and other financial perks.
Common Credit Issues
A credit repair company can help you identify common issues that may be holding you back from improving your overall credit score. Some common issues include:
- Credit report errors: The first issue you’ll want to rectify are errors or inconsistencies on your credit report. Common credit report errors include an incorrect date on a payment, accounts opened in your name you don’t know about, or other incorrectly labeled accounts.
- Late payments: Payment history is the most influential factor that affects credit. Just one missed or late payment can negatively affect your score for up to seven years! So, you’ll want to prioritize making all your due payments on or before their designated due date.
- Charge-offs: A charge-off account occurs when a lender writes off a borrower’s debt as a loss. If you’ve failed to make payments on a loan or other debt for a long period of time, you may have a charge-off account. To fix this, you’ll want to rectify the debt ASAP.
- Collection accounts: Before a lender writes a loan off as a loss, they may send the debt to collections first. At that point, the collection agency would try to work with the delinquent borrower to pay off their debt. Like a charge-off account, you’ll want to rectify the outstanding balance ASAP to fix this issue.
While repair companies can help you identify these issues, you can also monitor them on your own. In fact, keeping a close eye on your credit report and avoiding behaviors like making late payments will be key if you really want to improve your credit history!
Choosing The Right Credit Repair Company: Risks and Considerations
You want to pick the right credit repair agency that can offer you personalized credit counseling. When looking for the right credit repair company, consider the following tips:
- Check out reviews: Most businesses, including credit repair agencies, have online reviews available where you can see what kind of experience other people had with a particular organization.
- Look at credentials and review company websites for transparency: Make sure the credit repair company you work with is licensed and certified to provide financial services.
- Beware of potential scams: The Federal Trade Commission states that legitimate credit repair agencies have to follow a certain set of rules in order to maintain their licensing and certifications. Companies who claim to offer credit repair services but do not adhere to the proper protocol may be scammers. Signs of a potential credit repair scam include:
- Prepayment requirements.
- Promises to remove accurate but negative information from your credit report.
- Requests to submit disputes for accurate info on your credit report.
- Failure to answer questions or provide proof of credentials.
- Requests to not talk or work with any other credit repair agencies.
The Cost of Credit Repair Services
According to Business Insider, credit repair costs can range anywhere from $15 to $150 per month, depending on the type of services and coverage you opt for.1 Common fees include a “setup fee” or “first work fee,” which is an initial fee many credit repair companies charge for their initial credit assessment and analysis, and basic monthly fees, which can range depending on the types of services you request. Keep in mind that no credit repair company should ever ask you for payment upfront. In fact, the Credit Repair Organizations Act states that no company can offer credit repair services that require consumers to prepay.2 The Credit Repair Organizations Act also requires that credit repair companies include certain disclosures and give consumers the right to cancel services if they choose.2
Below are some popular credit repair agencies and the costs associated with their services:3
- Credit Saint: Setup fee between $99-$195, monthly fees between $79.99-$129.99.
- Lexington Law: $99.95 in monthly fees.
- The Credit People: First work fee of $19, $99 in monthly fees.
- Sky Blue: $79 setup fee for individuals, $119 setup fee for couples, monthly fees between $99-$119.
- The Credit Pros: Setup fee between $119-$149, monthly fees between $69-$149.
- Safeport Law: $129 setup fee, $129.99 in monthly fees.
How To Repair Credit Yourself
Credit repair companies are nice, but they aren’t always necessary. Below are actions you can take on your own to start improving your credit history.
1. Obtain Your Credit Reports
Being familiar with your credit report will be key in identifying habits and behaviors that are holding you back from improving your score. You can get a free copy of your official credit report from one of the three major credit bureaus or credit reporting agencies at least once a year, but you can also obtain unofficial reports as often as you like via most banks, credit card companies, and other financial institutions.
2. Review Your Credit Reports for Errors
When reviewing your credit reports, make sure all the information reported is accurate. If you see something off, like an incorrect payment date or an account opened in your name that you know nothing about, report it to a credit bureau immediately. At that point, the credit bureaus can work to remove the incorrect information from your credit report.
3. Follow Up on Disputes
After you report an error, follow up with the dispute to ensure that the error was properly removed from your credit report. If not, repeat the process of reporting the error to the credit bureaus and checking up on it again.
4. Negotiate with Creditors
If you are having trouble keeping up with monthly payments on any of your loans, talk to your lender before you miss a payment. They may be willing to negotiate your debt or extend your repayment terms so you can get lower monthly payments.
5. Pay Off and Reduce Debts
Paying off debts consistently and on time is one of the most impactful things you can do for credit repair. Payment history has the most influence on credit scores, and right behind that is amounts owed; both of these categories should see improvement when you make on-time installments and pay off loans.
6. Establish Positive Credit Habits
Establishing positive credit habits can not only help improve your credit scores but they’ll help you maintain that score as well!
7. Monitor Your Credit Regularly
Check on your credit report often. While checking every day may be unnecessary, checking in at least once a month will help you monitor the work you’re doing to improve your credit.
Do You Have Bad Credit? Consider Your Options with CreditNinja
Credit repair companies can be a great jumping-off point for consumers to learn about their credit scores and the actions they can take to improve their overall credit history. Part of the credit repair journey is paying off debts and making smart lending decisions.
If you are looking for an affordable loan that can come with flexible terms and competitive rates, try a CreditNinja personal loan! We’ve been an established lender since 2018 and have helped over 250,000 people find sustainable financial solutions. Check out our easy online application to start your journey towards financial success now!
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