3 Questions to Ask Yourself Before Signing Up for a Credit Repair Service

This whole credit thing can feel overwhelming.

Just building a credit score in the first place is a mystery to a lot of people. The availability of credit and the opacity of the industry can make keeping your score intact seem impossible. You might be ready to throw in the towel if you’re stuck with a low credit score you can’t seem to budge.

Credit repair services come in with flashy ads and over-the-top promises of fixing all these problems for you. The proposition is tempting.

These companies can simplify your life if your credit score is bad because of something complicated like reporting errors, shady debt collection or identity theft.

Regardless of your situation, however, you can always improve your credit without spending any money. And a lot of those flashy ads and over-the-top promises are outright scams.

How Does a Credit Repair Service Help?

Credit repair services clean up your credit reports — basically, they help you make sure everything showing up in your credit history is accurate.

You might need this service if you’ve experienced identity theft or inaccurate reporting that’s left negative marks on your credit report for actions you didn’t take. Credit repair companies can:

• Spot mistakes or information that can’t be validated. A creditor, collection agency or reporting agency must be able to prove the credit marks in your name are accurate. Credit repair services can help you send a debt verification letter to request that validation.
• Communicate with companies on your behalf. Requesting validation and asking multiple reporting agencies to update your credit report could be time-consuming. A credit repair company can handle the back and forth for you.

Credit repair services can’t guarantee they’ll raise your credit score — that’s never a sure thing. But that is the goal of eliminating errors from your report. Once the negative marks are gone, you should see a boost to your score.

3 Questions to Ask Before Signing up for Credit Repair Services

Before you agree to pay for credit repair services, answer these questions.

1. What Is Hurting Your Credit?

A lot of things can cause bad credit, and a credit repair company can only address a few of them. It can’t help if your credit is hurting because of:

• A history of late payments
• High credit utilization
• A lack of credit history
• Recent hard inquiries

As long as the negative marks on your credit report are accurate — i.e., represent your actual behavior, not fraud or a reporting error — they’re there to stay for seven to 10 years.

Rather than seek credit repair, if you’re overwhelmed by debt or unsure where to begin boosting your score, look into nonprofit credit counseling for free advice.

If inaccurate marks on your report are dragging your score down, credit repair services can step in and help you dispute them for a fee.

2. Can You DIY Instead?

You can do everything a credit repair company will do for you — you just have to decide whether you want to put in the time. In most cases, it’s not that much.

If your credit is hurting because of any of the factors above, you’re going to have to take it into your own hands and fix your score over time.

If you’re dealing with inaccurate marks on your credit report or debts you don’t think creditors can validate, credit repair services could take care of the heavy lifting, or you could contact creditors and reporting agencies yourself.

3. Is the Company Reputable?

If you decide you want to pay for credit repair help, vet companies carefully. You’ll face a lot of scammers trying to prey on desperate debtors.

“You always have to be careful when dealing with a credit repair company,” warns Beverly Harzog, consumer finance analyst and credit card expert at U.S. News & World Report.

Harzog notes two red flags that should send you running:

• Promising to remove negative marks, even if they’re accurate. You can’t remove accurate marks from your credit report early. Only inaccurate marks are worth your time and potential money to dispute.
• Charging upfront fees. The Federal Trade Commission’s Credit Repair Organizations Act forbids credit repair services from collecting advance payment. Legitimate companies typically only collect a fee if they’re successful in improving your credit report.

“Brush up on your rights before you hire one of these companies,” Harzog suggests.

If a company is free of red flags, read some customer reviews to get a sense of whether past customers have found it useful for the types of credit issues you face. Even legitimate companies might simply overpromise or be ineffective in situations like yours.

Should You Pay for Credit Repair?

Credit repair services charge for the same thing any other service company charges for: convenience.

You can handle your credit report and fix your credit on your own if you want to take the time to file disputes and send requests for validation. Unless your report is oddly riddled with errors, this probably won’t take a ton of your time.

If you’d prefer to spend your time on anything else, feel free to hand over some money for credit repair. Just ask these questions and give it a quick gut check first to make sure you get the service you pay for.

Dana Sitar is a contributor to The Penny Hoarder.