The short answer to this question is sometimes. If you select a reputable credit repair organization, the company may be able to help you raise your credit score, remove negative items from your report and settle debts. However, a company with poor service may not do any good and may end up costing you more money. If you accidentally sign up for a scam, you could lose money and hurt your credit even more. These are some important considerations for making sure that the credit repair service works to your advantage.
Unfortunately, there is no nationwide law prohibiting credit repair businesses from operating without a formal license. You can protect yourself by taking a few steps to verify that the company is acting legally and operating ethically. First, check with the Better Business Bureau to see if the company is even listed. If they have a good rating, this is a decent start. You may want to shop around if you do not see the company listed or if there are negative reports and a poor rating. Look on the BBB profile for adverse actions.
Also, the Credit Repair Organizations Act was put in place to protect consumers. There are certain practices that are deemed illegal. These are some examples of what the company must do:
- Must be honest about what they can do for you.
- Must provide your legal rights in writing.
- Must allow you to cancel for a full refund within 72 hours.
- Must be honest about costs and limitations.
- Must explain any guarantees and exceptions.
Spend some time researching the company’s reputation online. Look at third-party sites such as Consumer Reports and others where people can post their opinions. Avoid biased sites and the official sites of the companies themselves. Although every company will have some negative reviews, the majority should be positive. Beware of companies that are known for practices that violate the CROA. Also, pay attention to how long a company has been in business. Approach newer agencies with caution.
Credit Repair Plan
Ask about the credit repair company’s plan. If they are vague about it and do not provide details, avoid doing business with them. The FTC recommends working with a company that has a comprehensive service. For example, the company should teach you how to help boost your score while they work on settlements, disputes and raising your score. This could include steps such as cutting unnecessary expenses to pay down credit card debt, transferring balances to pay off a debt quicker or setting up a budget. A good company will do what it promises, and a great company will also teach you how to be a guardian of your credit in the future with actionable steps.
Avoid companies that promise to fix your credit within a month or raise your score 60 points within a month. Look for a company with more realistic goals that take some time since credit repair is a process. For example, a company that estimates raising your score 30 points within the first several months is probably a better bet. Also, the organization should help you set up a long-term plan to protect your credit and keep building it.
Compare the costs of several companies after screening them for reputation and legitimacy. Pay attention to the extent of services in relation to the total cost. If there is a monthly fee and the process is estimated to take a few months to finish, do not be surprised if that time estimate is doubled. Also, be sure that the steps in the plan are not ones you could easily do yourself.
Some people say that credit repair companies do not work because they take longer than expected to settle debts and remove negative items. If you have the time, you can do this yourself. Contact the creditor to set up a plan or settle with the agreement that they will list the debt as “paid as agreed.” Also, you can dispute any inaccuracy with the bureau that reported it.