With all the articles you see online and elsewhere about keeping your credit score high and your credit history in good shape, it’s no wonder people consider hiring a pro for “credit repair.” Seems logical enough: The world is full of pros promising to repair anything from a leaky faucet to a leaky heart valve. Why not hire one to hammer out the dents in your credit history?
Here’s a recent reader question:
Do you have any experience with any of the credit repair services such as [Redacted] or [Redacted]. Are these companies legitimate? Any information would be greatly appreciated.
I don’t know when I did my first news story on credit repair, but I’m sure it was close to 20 years ago. The short answer to Mike’s question? Steer clear of credit repair companies.
Please note the difference between credit counseling agencies and credit repair companies. Credit counseling organizations are usually nonprofit, charge little to nothing, and exist to help those in debt create a plan to repay it. Credit repair companies are often for-profit, charge high fees, and, at least in some cases, promise improvement to a credit history they don’t deliver.
How to improve your credit history and score
There are only a few ways to legitimately improve a credit history…
- Have incorrect or outdated negative information removed. To do this, simply find mistakes or outdated negatives (generally late payments, etc. more than 7 years old) and report them to the credit reporting agency (Experian, Equifax, or Trans Union) that’s displaying them. The law requires they remove it.
- Have correct negative information removed. This can only be done by the company that put the negative information there in the first place: the creditor. Why would a credit card company or other creditor remove late payments or other accurate negative information from your credit history? Maybe you agree to pay a debt in exchange for having negatives removed. Or maybe they just give you a break because you’re a good customer and you ask nicely. Not common, but possible.
- Let time heal your wounds. This is the simplest idea albeit frustrating slow: Pay your bills on time and wait for the bad stuff to fade away. While it’s true that negatives appear on your credit history for 7 years, it’s not like you have to wait that long for improvement: The older your negatives are, they less they matter.
While these are the basics, there are details you’ll want to know to improve your credit history. No worries: They’re right here in my story 3 Steps to Improve Your Credit History. The Federal Trade Commission also has plenty of information at this page of their website.
Why you shouldn’t pay a credit repair company
The short answer is there’s nothing they can do for you that you can’t do for yourself. But more important, as I implied above, credit repair companies are often rip-offs. From this page of the Federal Trade Commission’s website…
The FTC acts aggressively against “credit repair” scams, which are marketed as quick and easy ways to rid individual credit reports of negative information. In the last 10 years, the Commission has brought more than 40 cases against con artists that allegedly lied about their credit-related services. In one recent case, the FTC charged Bad Credit B Gone, LLC, with violating federal laws by claiming it could improve most consumers’ credit reports by removing negative information that was accurate and not obsolete. The court ordered the company to pay more than $322,000 in equitable monetary relief. Other enforcement actions:
- Promoter of Credit Repair, Debt Relief Services to Settle FTC Charges
- Credit Repair Scammers Settle FTC Charges
- ‘Credit Repair’ Operation Settles with FTC; Company Made False Claims and Charged Illegal Up-Front Fees
- Court Closes Book on Credit Repair Ripoff
- FTC Charges Seven Credit Repair Companies with Deceiving Consumers Throughout the U.S.
- Credit “Repair” Company Agrees to Settle FTC Charges; Company Made False Claims About Its Credit Repair Services
- ‘Operation Clean Sweep’: FTC and State Agencies Target 36 “Credit Repair” Operations
- FTC Obtains Court Order Against Husband-Wife Credit Repair Team
- FTC Obtains Court Order Halting Credit Repair Scheme
- FTC Charges Home Buying Consulting Business with Credit Repair Violations
So there’s the problem with credit repair companies: Even if you’re willing to pay someone to do something that you can do yourself, the odds are too great that you’ll end up dealing with a bad apple. Don’t do it.