Whether it's your car, your plumbing or your body, if it's broken, there are pros who often can repair it. But can the same be said for your credit?
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 one of many reader questions I’ve gotten on this topic:
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 more than 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. You can learn more about them here.
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- Have incorrect or outdated negative information removed. To do this, simply find mistakes or outdated negatives (generally late payments, etc., more than seven years old) and report them to the credit reporting agency (Experian, Equifax, or TransUnion) that’s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 frustratingly 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 seven 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. You can learn about them in stories like “Ask Stacy: Can You Help Me Clean Up My Credit History?” and “7 Fast Ways to Improve Your Credit Score.” The Federal Trade Commission also has 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, some credit repair companies are rip-offs. How do you avoid one? From this page of the Federal Trade Commission’s website:
Signs of a Credit Repair Scam
You’ll know you’re encountering credit repair fraud if a company:
- insists you pay them before they do any work on your behalf
- tells you not to contact the credit reporting companies directly
- tells you to dispute information in your credit report — even if you know it’s accurate
- tells you to give false information on your applications for credit or a loan
- doesn’t explain your legal rights when they tell you what they can do for you
If you are going to pay a company anyway, read this
While credit repair is perfectly suitable for the do-it-yourselfer, there are always going to be those who prefer professional help. Fine. Just for you, we’ve partnered with a company we know that isn’t a rip-off: Debt.com. You can learn more about that on this page of our Solution Center.
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I founded Money Talks News in 1991. I’m a CPA, and over the years I’ve also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate. Got some time to kill? You can learn more about me here.