Do Credit Repair Solutions Work?
When It Comes To Fixing Your FICO, Should You Pay Someone Else Or Go DIY?
If you’ve been flipping channels late at night, you’ve probably seen flashy ads from companies claiming that they can completely clean up your credit score – exorcising the ghosts of repossessions, late payments or any of the other financial demons that might haunt your credit report.
Their pitch is a simple one: Contract with us for a monthly fee, and we’ll do the heavy lifting required to repair your damaged credit so you can qualify for better credit card rates, car loans and all of the benefits that come along with a better credit score.
It sounds enticing—and all the more official when they say they have a team of lawyers who will aggressively help with your case. But can a fee-based credit repair service actually help? And are they really doing anything you couldn’t do yourself for free?
Just like the permanent record of all of your school-aged indiscretions that lives somewhere in your high school’s files, your credit report can be a nasty piece of work—a living, breathing compilation of all of your financial transactions, good or bad.
It can also be rife with errors—that credit card you paid off long ago but is still shown as active, for example—and full of credit-score-killing details like late payments, unpaid bills and outdated collection records from the folks who loaned you money.
A hired gun can go right to the busywork of disputing those items, but don’t expect results overnight.
“Legitimate credit repair companies take their time with the repair process, contacting lenders directly and negotiating on your behalf,” says William Lipovsky, CEO of First Quarter Finance, a personal finance website. “The process may take up to six months, depending on the complexity of your case. As a result, reliable credit repair services may also be more expensive than the scammers who promise quick turnaround at low prices. But several of the best credit repair services also offer money-back guarantees.”
Financial experts also suggest you shop around and read online reviews and ratings of the credit repair agencies themselves, as it’s a field that seems to have attracted a record number of scam artists—the kind who ask you for additional funds for follow-on “special” services, for instance.
“It will take about 45 to 90 days after all of the dispute letters have been sent to see any kind of upward movement of your credit score,” says Joyce Blue, a money and self-empowerment coach. “That will also depend on how many wrong items are included in your credit report. But also remember that simply hiring a credit repair agency won’t get the debt collector calls to stop.”
That’s an important point to note, especially if your less-than-stellar financial management skills have resulted in accounts going to collection agencies.
“Consumers mistakenly believe that the credit repair service will get collections off their back, but credit repair is not the same thing as debt settlement,” notes Nathan Grant, a credit industry analyst with Credit Card Insider. “Be sure to read through the contract thoroughly to make sure you know exactly what services you will be getting.”