Most companies have setup fees
Most credit repair companies charge an initial fee (also called setup or first work fee) that can range anywhere between $15 to $200. This fee is used to set up your account, which may involve gathering your personal and financial information and creating a strategy plan for your particular credit situation.
Credit repair companies can’t charge you in advance for their services
Once you pay the setup fee (if required), companies can’t make any additional charges unless they prove that the services offered to you in contract are being fulfilled.
Legitimate credit repair companies should include a copy of the Consumer Credit File Rights
Under the Credit Repair Organizations Act (CROA), credit repair companies must give you a written contract outlining their services before receiving any payment from you. The agencies must also give you a copy of the “Consumer Credit File Rights Under State and Federal Law,” a document that is meant to inform you of your right to order credit reports and dispute inaccurate information yourself.
You have the right to cancel any services without incurring any penalties within 3 business days
The CROA also states that you have the right to back out of a contract within three business days without any charges or cancellation fees. This is also stipulated by the Federal Trade Commission’s (FTC)’s Cooling-Off Rule.
How Credit Repair Agencies Work
Each credit repair company has its own way of doing things, but most of them follow a four-step process:
The credit repair company will walk you through the process, pull your credit reports from all three bureaus and determine if you’d be a good candidate for credit repair.
Limited power of attorney and written consent.
The company’s representatives will inform you if they find mistakes in your file, and send you a written contract giving them limited power of attorney, that is, the legal right to act on your behalf.
With your legal consent, the company goes on to dispute inaccuracies with your creditors and the major credit bureaus. Once they’re notified, credit reporting agencies must then investigate within 30 days of receiving a dispute. Once they confirm them as errors, they’ll remove them from your credit profile.
A good credit repair company will track the disputes’ progress and update you on the status of each disputed item. They will usually send progress reports along with an updated copy of your credit report so you can review the changes.
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How to choose the right credit repair company
Check for Credit Repair Organizations Act (CROA) compliance
CROA establishes clear directives that legitimate credit repair agencies should follow, and it’s important to ensure the company you choose is compliant in every step of the process.
Companies must provide a written contract explaining in detail the services they will provide, how long it will take for them to get results, any guarantees they offer and the total credit repair cost for their services.
You have the right to walk away without penalty within three days of signing the contract if it does not satisfy your requirements.
Read customer reviews
Sources like Google Reviews, the Better Business Bureau (BBB) and Yelp are useful starting points in gauging customer experience. They each have their own way of offering feedback and evaluating companies, with the BBB giving an A-to-F grading system and Yelp offering its well-known star ratings, for example.
These websites are helpful, but we recommend complementing what you read with further research — after all, most people post reviews when they’re unhappy with a service, not when they’re satisfied.
Having said that, if you read multiple reviews alleging similar types of issues, you should certainly consider it a red flag.
In our search for the best credit repair companies, we focused on those that received mostly positive consumer feedback across multiple review websites.
Check the Regulatory Agencies
The credit repair industry is tightly regulated and must abide by the provisions of multiple consumer protection laws.
One of the agencies overseeing the industry is the Consumer Financial Protection Bureau (CFPB), a federal organization that protects consumers from fraudulent or predatory practices by banks, lenders or any type of financial institution — including credit repair companies.
When searching for the right credit repair company, it’s a good idea to check the CFPB complaint database and check how many complaints — if any — have been filed against the company you’re considering.
Compare fees and turnaround times
Reputable credit repair companies will list their prices and services clearly, so consumers can select the right package for their needs easily. Turnaround time should be reasonable, and the company must keep you updated about the progress.
Look for personal finance tools
Besides their standard credit repair services, many credit repair companies include features like financial tools, guidance and expert advice, satisfaction guarantees, credit monitoring, and identity theft protection services.
A free credit consultation can be particularly useful, because you can get a professional evaluation before committing to the service.
Difference between debt settlement, credit repair and credit counseling
As we said above, there are different ways to repair your credit.
Debt settlement, credit repair and credit counseling are all in the personal finance sphere, but it’s important to note the key differences between the three services.
|Debt settlement service
||Credit repair service
||Credit counseling service
||Non-profit, but may charge a service fee
|Resolves your debt and makes a deal to pay it off at a reduced amount
||Identifies and repairs mistakes on your credit report
||Provides debt and money management advice, but does not renegotiate overall debt
|Involves stopping debt payments until a settlement is reached.
||Communicates with creditors and reporting bureaus to get mistakes corrected and removed from your credit report
||Negotiates payment plans with creditors to protect you from debt collectors or late fees
|Will impact credit negatively for up to 7 years
||Improves credit by removing reporting mistakes
||Improves credit with debt management plans
|Hurts chances of getting loans or credit cards
||Increases the possibility of being approved for loans and credit cards
||Increases the possibility of being approved for loans and credit cards
|Best as a last resort
||Best for people who don’t have the time to repair their credit themselves
||Best if you’re having trouble making payments and need some help
If you’re interested in using a credit counselor, The National Foundation for Credit Counseling offers low-cost debt counseling, debt consolidation, and debt management plans.
7 Warning Signs of a Credit Repair Scam
The credit repair industry has had its share of controversies and scams. It’s important to recognize the red flags indicating a company or agent you’re dealing with might be engaging in some questionable practices.
DIY Credit Repair
Credit repair companies are helpful if you can afford the service and don’t have the time to dispute the items. However, do note that you can fix your own credit — and at no cost. There are also ways to improve your credit score without the help of a credit repair agency.
Free credit reports from the three main credit bureaus — Equifax, Experian and TransUnion — are available at AnnualCreditReport.com. Once you examine your reports for any discrepancies or errors, you can go to each bureau’s website and file an online dispute. They will investigate within 30 days and, if they confirm it’s a mistake, will delete the item from your report.
They might also delete items from your report if your debtor cannot validate the debt and is unable to provide evidence that the debt belongs to you.
If you’d like to try it, it’s important to really know how to read a credit report. Once you have that down, check out our guide on how to remove items from your credit report.
Covid-19 and Credit Repair
Free credit reports
Experian, TransUnion, and Equifax are offering access to a free credit report weekly through April 2022. Take advantage to check your reports for errors and, if there are any, dispute them or consider hiring a credit repair company to do it for you.
Credit reporting errors during COVID-19
It’s important to watch out for erroneous “late payments” on your credit report — especially if you enrolled in a deferral program during the COVID-19 pandemic. Loan, mortgage or credit card payments shouldn’t be marked as late if your lender agreed to temporarily suspend them. Contact your lender right away if you notice deferred payments are being incorrectly labeled as late on your report. If your lender doesn’t resolve the issue, contact the credit reporting agencies to begin a dispute process.
CARES Act protections
If you obtained a forbearance on a federally backed loan during the pandemic, these are some things to remember:
- Forbearance, payment deferrals or pauses should not show up on your credit report or bring down your credit score. This applies to suspended collections and defaults as well.
- Homeowners with federally backed loans (HUD, FHA, VA, USDA, Fannie Mae and Freddie Mac) are protected from foreclosure until July 31, 2021 and can apply for mortgage forbearance.
- Student loans are eligible for suspensions on loan payments, collections, defaults, and interest rates are set to zero until at least September 30, 2021.
How We Chose The Best Credit Repair Companies of 2021
During our research, we looked at each company’s history of Federal Trade Commission (FTC) violations and whether they had any customer complaints or enforcement actions filed with the Consumer Financial Protection Bureau (CFPB). We chose credit repair services with a low number of complaints with regulatory agencies, have been around for over ten years and have positive customer reviews across different platforms.
A credit repair service essentially assumes responsibility for writing dispute letters, communicating with lenders and credit bureaus and ensuring removal of each item. It helps if the standard service is complemented with other features. Multiple pricing options, additional financial tools, expert advice, and service guarantees helped companies stand out from the competition.
Pricing Options and Service Guarantees
These were the two most common aspects throughout the companies we evaluated, so we decided to emphasize them further in our vetting process. As we researched companies, we made sure that their pricing options were as ample and/or varied as possible, and that their service guarantees were transparent and with little-to-no exceptions. This way we can offer choices for customers with different financial situations while assuring that each company stays true to their service promise.
Summary of Money’s Best Credit Repair Companies of October 2021