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Many people have heard the term “credit repair” but don’t understand exactly what it is or who can benefit from it. For the right person, credit repair can help them get back on track toward a strong financial future. This guide can help you understand if you’re a candidate for credit repair services, as well as all the ways credit repair can help you.
What is credit repair?
Credit repair is a process through which individuals take steps to improve their credit. The hope is that steps can be taken to increase the person’s credit score, ultimately giving them access to more borrowing and financial opportunities. There are credit repair services, but people can also take these steps on their own.
Typically, professional credit repair services start with a comprehensive review of your credit reports. You and your credit repair advisor should try to identify anything incorrect or false on these reports. If anything is found, the credit repair specialist can file a dispute with the credit bureaus on your behalf. A credit repair company or you as an individual can dispute mistakes on your credit reports such as:
- Incorrect information about you (birth date, spelling of your name, address)
- Debts that are listed twice
- Debts that are listed as open but have been paid
- Debts that don’t belong to you
- Debts that have incorrect information about payments, balances or dates
Everyone has the right to work to repair their credit. You don’t need a credit repair company, but you can choose to work with one if you want. A credit repair professional has been through the process many times, so they know what to look for and how to file disputes that are more likely to get approved.
However, it’s important to note that there are no guarantees with credit repair. Additionally, there are—unfortunately—some scammers in this industry, so consumers should do their research and only work with legitimate credit repair companies. Anyone who promises to remove verified and accurate information from your credit reports is likely not to be trusted.
There are also other credit repair or improvement steps that anyone can take, such as paying down debt, increasing credit limits and making goodwill requests.
6 signs that you could benefit from credit repair
Here are six signs you could be a good candidate for credit repair.
1. You’re paying a lot in interest
If you’re carrying a significant amount of debt, you might find the total interest you pay every month to be overwhelming. Unfortunately, poor credit usually comes with less favorable terms on loans and revolving debt, which are much more expensive for people in the long run.
For example, while people with a credit score of 720 or higher have an average credit card interest rate of 13.5 percent, people with a credit score of 579 or lower have an average credit card interest rate of 21 percent. If two people with each of those respective interest rates were carrying $5,000 in credit card debt, over one year, the person with a better credit score would pay around $200 less in interest—$373 compared to $586.
Credit repair services try to get you the most accurate credit report by disputing false information on your credit report. And hopefully in turn you’ll have a higher credit score, and you’ll be able to negotiate with your existing lenders to get an improved interest rate. Or, you’ll have opportunities for other lending options, so you may switch your debt over to a new, better-term lender.
2. You’ve been denied credit
Individuals often rely on credit throughout their lives. We apply for credit when we need a new credit card, an auto loan, a mortgage or even a personal loan. Unfortunately, when you have poor credit, it’s more likely you’ll be denied when applying for new borrowing opportunities. In fact, poor credit can have other negative effects, such as causing you to be denied a job or a rental application.
Being denied credit is a lot more common than some may realize. A survey of 3,780 adults found that 32 percent of millennials (those ages 24 – 39) were denied credit in 2020. Luckily, credit repair services can help. Improving your credit will open the door to more financial opportunities, so your chances of approval when applying for credit, jobs and rental leases are higher.
3. You have accounts in collections
Having accounts in collections can be detrimental to your credit. When lenders give up on collecting a debt from you, they often send your account to a collection agency. This shows up as a negative item on your credit report and typically results in debt collectors continuously reaching out to you for payment.
If you no longer want to deal with the headaches that come with debt collectors, a credit repair company can help. You and a credit repair advisor will ensure the collection record on your credit report is entirely accurate. If there are mistakes, the credit repair advisor can help you dispute the collection. If the record is correct, the credit repair professional can advise you on the process of paying off the debt in a way that will benefit your credit report the most.
4. Your credit score is low
If your credit score is low, you simply have access to fewer opportunities. Not only will you not be able to get all you want (credit cards, mortgages, rental leases, auto loans, etc.), but when you are approved, it will be with poor borrowing terms.
So, what’s a poor credit score? Generally, a bad credit score is anything below 600. If your score is in this range, you can likely benefit from credit repair services.
5. You find errors on your credit reports
In one study, one in three participants found an error on one of their credit reports. This demonstrates just how common errors can be. Under the Fair Credit Reporting Act, though, every consumer is entitled to an accurate credit report.
It’s important that any errors on your reports are corrected, because you don’t know what kind of an impact they could be having on your credit. Some errors, such as inaccurate or unverified negative items, could be dragging your credit score down. A credit repair advisor, with your help, can find mistakes on your credit reports and dispute them for you.
6. You’re a victim of identity theft
Unfortunately, when you’re a victim of identity theft, a lot of the “cleanup” is left in your hands. The credit bureaus won’t go out of their way to remove all the false information from your credit report. Instead, you’ll likely have to file a dispute and prove identity fraud for every single item that’s showing up on your account and shouldn’t be. This could potentially be a long and challenging process, but a credit repair company could help you through the process.
Should you work with a credit repair company?
The decision to work with a credit repair company will ultimately depend on your situation. You’ll work with the credit repair companies to review your credit reports and try to find inaccurate information, and they’ll file disputes on your behalf. Additionally, credit repair companies usually provide tips on how to improve your credit beyond filing disputes.
It’s important to understand that you could technically do everything a credit repair company does on your own. However, what you’re ultimately paying for is their expertise. For example, when people try to dispute items on their own, they typically run into these disputing errors:
- Not including enough information to prove your dispute: While credit bureaus are legally required to review your dispute, they don’t have to follow through with a case if they believe the claim is “frivolous.” Not including enough information can cause your dispute to be seen as invalid.
- Not correctly arguing extenuating circumstances: Things like divorce, military service and medical bills can complicate your credit situation, and you might not know the best way to explain everything to give a dispute the best chance at success.
- Getting caught in hidden legal clauses: If you purchase your credit report online, there might be hidden fine print that says unless you send an opt-out letter to the credit bureaus, you won’t be allowed to participate in potential class-action lawsuits and some individual suits. This could negatively impact you in the future.
When you pay for credit repair services, you’re paying for the convenience of having someone else do the hard work, plus the benefit of their expertise so it’s done correctly.
Ask yourself these questions if you’re trying to decide whether you need professional help:
- How many items on my credit report need to be addressed?
- Have I already tried to improve my credit myself without success?
- Do I fully understand my rights under the law?
- How much time do I have to spare for this myself?
Anyone can improve their credit
With time and diligent credit use, anyone can improve their credit. Check your credit score and reports to identify which of the five credit factors—payment history, credit utilization, new credit, credit age and credit mix—you can work on, and then move forward with that. For example, if your credit utilization is above 30 percent, you could work on using less of the credit available to you every month.
And consider working with credit repair professionals if you want additional help. CreditRepair.com can show you exactly what’s hurting your credit and how you can fix it.
Reviewed by Leikeisha Finai-Jones, Credit Consultant at CreditRepair.com.
Leikeisha Finai-Jones joined CreditRepair.com back in 2020 as a social community coordinator. Leikeisha knows how the credit industry works and how what pitfalls consumers need to look out for—Leikeisha mastered the skill of problem-solving even in tough situations involving identity theft, credit repair and other issues. Leikeisha has seen it all, and knows how consumers can make the most of their rights to boost and protect their credit.
Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.
