Your credit score is one of the most important metrics in your financial life. As such, keeping a close eye on it is not only beneficial, but also outright necessary given today’s rampant data breaches, as identity thieves will use the information leaked in these breaches to open new lines of credit in their victims’ names. Since the victim has no idea the accounts have been opened, they don’t make payments and essentially destroy their credit. If you find yourself with bad credit because of identity theft or your own financial decisions, the first thing you’ll want to do is check your credit reports to verify everything is accurate. From there, based on what you learn, you’ll likely want to see if you can get some of these items corrected or removed from your credit reports — that’s where credit repair steps in. To help you determine if a credit repair service is the best option for you, we’ve detailed everything you need to know.
What is credit repair?
Credit repair is a process in which you’re able to dispute items that appear on your credit reports and damage your credit, such as errors, misinformation or derogatory information. This process (detailed below) can be completed with or without a credit repair service. As such, the preference to enlist the help of a service might depend on your own confidence in dealing with lenders and the credit bureaus.
How does credit repair work?
After identifying items on your credit reports that you believe are false, you’ll need to prepare copies of the documents that support your position, such as payment history details and other communications between you and the lender, along with a letter detailing why they’re errors or misinformation. The documents and letter must then be sent to the necessary credit bureau (Experian, Equifax or TransUnion). Once the bureau receives your complaint, it will reach out to the lender(s) with whom you have the dispute. Depending on the lender’s response, the item can either be removed or will stay on your credit history. In the instance the item stays and you feel you have definitive proof that contests the item, you can add a 100-word Statement of Dispute to indicate to anyone who reads your credit report that the item is misreported and incorrect. That way, if you apply for a new loan or credit card, the future lender will see this statement and might ask you to share your side of the story on a contested item. It should be noted that the Statement of Dispute only stays on your credit report for two years.
How could a credit repair service benefit you?
While you can opt to do this process by yourself, a credit repair service has expertise in dealing with both lenders and the credit bureaus. If you can afford the service and have no experience, limited time or limited familiarity with the repair process, a credit repair service may be worth consideration, as they will likely be a better advocate for you because of their more complete understanding of credit reporting laws. In addition to repairing your credit, some of these services – especially the subscription-based ones – also offer proactive credit monitoring as to prevent future misinformation from appearing on your credit reports. The only tradeoff of course is the price, especially if you’re trying to maintain your credit reports over time rather than just a one-time use scenario. As mentioned before, this service is obviously best suited for disputing items that you already know to be misinformation rather than items that simply look bad on your credit report, as those will likely not get completely removed.
Are there any risks?
Credit repair is a legal right, as such there are no risks with engaging in credit repair either alone or with the help of a legitimate service. Legitimate is the key word however, as there are a many credit repair scams that pose as genuine services. Certain tell-tale signs include upfront demands of payment or guarantees to exonerate you of your current debt or reset your credit history. While some of these scams make good of their promises, they often break the law to do so, which can get you into a lot of trouble and put your credit report in even worse shape than it was before.
It should also be noted that while there are a handful of trustworthy credit repair services out there, there are some companies that attempt to take advantage of people looking to repair their credit. With the hopes of protecting consumers, the Consumer Financial Protection Bureau created a guide to spotting credit repair scams. Another helpful source, the Federal Trade Commission details your legal rights with regards to credit repair — knowing these is the first step to protecting yourself from bogus credit repair services.
If you’re not sure where to start, we reviewed some of the top names in credit repair. Read our credit repair reviews to choose from services that are known for being both legitimate and successful in dealing with credit repair on their clients’ behalf.