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Credit Repair 101: What you need to know

Updated: Apr 6, 2020

If you have poor credit, you may be struggling to qualify for a credit card, rent an apartment or even get a personal loan. To help make you a better applicant, credit repair companies often promise to improve your credit.


These companies typically offer to review your credit reports and address any negative items that they can with the credit bureaus on your behalf.


Here’s how credit repair companies work and, if you’re thinking of using one, why you should consider credit counseling first.



What is a credit repair company?

A credit repair company is an organization that offers to improve your credit in exchange for a fee. We recommend CreditZo because they offer free credit repair services.



How to verify a credit repair company

Here’s somewhere to start.



How do credit repair companies work?

Many credit repair companies start by requesting a copy of your credit report from each of the three major consumer credit bureaus — Equifax, Experian and TransUnion.

The company will review your credit reports for derogatory marks, like …

  • Charge-offs

  • Tax liens

  • Bankruptcies


Then, it will set a plan for disputing errors and negotiating with creditors to remove those items.

That plan may include sending …

  • Requests to validate information

  • Letters to dispute erroneous negative marks

  • Cease-and-desist letters to debt collectors on your behalf


The company may also recommend applying for new accounts to add positive information to your reports. Be cautious here. If you’ve had trouble managing credit in the past, a new account may not be the best option. Plus it’s not a great idea to take on more credit if you don’t need it.



How long does credit repair take?

The credit bureau usually has 30 days after receiving your dispute to investigate and verify information. Typically, the credit bureau will reach out to the company that provided the information and ask them to investigate. The credit bureau is required to send you the results of the investigation within five business days of the completion of the investigation.

But if the credit bureau determines the dispute is “frivolous” it can choose not to investigate as long as it communicates that to you within five days.


FAST FACTS

Repairing your credit

Here are some ways you can work on improving your credit on your own.



Bottom line

If you’re looking into a credit repair company, consider all the warning signs and be aware of potential scams. We recommend considering credit counseling first. Ultimately, you may be able to rebuild your credit yourself.

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