You have likely heard of “credit repair” at some point in your adult life. In fact, nearly a third of the population has a credit score lower than 601 according to Experian—one of the three largest credit reporting bureaus in the United States, with operations in 40 other countries. These numbers come from Experian’s “VantageScore 3.0 data”, a system generating credit scores that are more predictive, inclusive, and consistent. THe model measures scores in the 300 to 850 range. With this model, Experian estimates that 30% of Americans have poor or bad credit, while many don’t have a credit score at all. And not having a credit score at all is easily as detrimental as having low scores.
Before we dig into “credit repair“, let’s get a better understanding of how credit works, shall we? Using VantageScore’s model, consumers are divided into five different categories.
The categories are as follows:
- Super prime ( 781 to 850)
- Prime (661-780)
- Near prime (601-660)
- Subprime (500 to 600)
- Deep subprime (300 to 499)
Most people land in the “good” category, while 36% fall in the prime category. Hurray for them. However, 68 million people have bad or poor scores (lower than 601).
Assuming you are reading through the end of this article, you may be in that 68 million statistics. So, the real question may be, even though you’ve heard of “credit repair“, what is it really?
What Is Credit Repair?
Credit repair is just as the name says. It deals with fixing your poor credit in whatever way you can manage. However, as most will use the phrase, they mean the process of disputing errors on credit reports. As the consumer, you can go through this process of disputing errors on credit reports for free with each of the credit bureaus. This process will include filing a formal dispute with credit bureaus via online or the classic snail mail. Your formal dispute should include an explanation of what the error is, along with every piece of supporting documentation you can find.
The Process Of Disputing Errors On Credit Reports:
- Visit the credit bureau’s website to start the process.
- Some credit reporting agencies will let you dispute the claim online.
- You will have to upload supporting documentation.
- The credit bureau will have 30 to 45 days to investigate your dispute.
- If the credit bureau verifies the error, they will have it removed.
Things To Know About Disputing Errors On Credit Reports
You should know that errors are not uncommon. Inclusively, a study found that one in five Americans has an error on their credit report. Some of these errors are much more than an old addresses and can be detrimental to your day to day life. They can cost you thousands of dollars in interest rates, so be sure you catch them if they are there.
Credit report errors can occur for endless reasons. Among them is the mixing up of files. With so many people applying for credit, if someone has a similar name to you, files could get mixed up. Of course, identity theft is also a risk. Another common factor is re-aging of old debts. Some debts are supposed to “age off” after 7 years, or 180 days. But often times re-aging occurs, and debt is sold to a third-party collector which confuses the start date of the said debt.
How To Find Errors
You’ll need to first find the issue, before fixing it. You can do this by getting free copies of your credit reports once a year. Use AnnualCreditReport.com, as well as pulling reports from major reporting companies. Be sure to go through each and every section of your credit report. Check for late payments or accounts you have no memory of. Every error you find will have to be disputed individually.
How To Write An Effective Dispute Letter
When you begin to write your dispute letter, remember to be clear and concise. Pin point exactly what is wrong, the date, the lender. etc. You also don’t need to quote the laws, they know the laws. Be sure to include your accurate return address, so your answer can be received at the right address.
Disputing Your Own Errors Vs. Hiring A Company
Disputing your own errors is quite the DIY method these days. Many people will find that they do not have the time, nor knowledge to successfully dispute errors or know enough about the “credit world”. This is why many folks will look into hiring credit repair companies who will dispute errors for them. Of course, as any business, these companies will charge a fee for their work.
You may be hesitant to fork up extra cash for this service but take into account it often times is worth it. An example would be in the case of identity theft.
How Do Credit Repair Businesses Work?
Credit repair businesses should be responsible to uphold your legal rights. Among these legal rights are, “your credit report must be 100% accurate, entirely fair, and fully substantiated.” If some of your credit reports don’t meet ALL THREE standards, you may need to consider credit repair.
A “worth-it” credit repair company will pull credit reports from each of the three major credit reporting agencies to be able to narrow down your credit issues. Once they identify those errors, they will need any supporting documentation.
For example, a credit repair company would help you identify mistakes like—there may be a blemish on your credit from your ex-husband or ex-wife, which should not be there thanks to your divorce decree.
How Much Do Credit Repair Companies Cost?
The price for credit repair varies as most services do. Depending on the company, your location, what services you need, or how many claims they have to dispute, the charge will vary.
However, before you sign any contract, understand what you are signing, and how much you will have to pay. You certainly don’t want a surprise bill you didn’t plan for when all is said and done. Also, note that credit repair companies are not allowed to charge you before any work is actually completed. This is good for you.
Should You Trust Credit Repair Companies?
This is scary territory you are marching into. Up until know, searching for a credit repair company may remind of walking into a car dealership full of hungry sharks (A.K.A. salesmen). You probably have seen advertisements that promise quick and immediate improvements in your credit score. “Improve your credit score by 200 points TODAY!”—is pretty unlikely to be true. It should be red flag number one, as credit repair companies should NEVER promise results (actually, it’s illegal). Stay away from such companies.
You should also face the other way when a credit report company is asking for funds up front. “The FTC prohibits credit repair companies from charging for credit repair before any work is complete”.
What To Look For In A Credit Repair Company?
- Companies who understand your rights, and ensure that you as the customer, understand them as well. Don’t shy away from asking questions, you should understand your rights forwards and backward after speaking to a credit repair company.
- They are interested in hearing your background.
- They will explain how they will represent you to credit bureaus. All good credit repair companies will know what they are able to do for you. They will also know what they are not able to do for you. And even further, they will explain each of those things to you.
Which Credit Repair Companies Are Best?
Finding the right credit repair company might be a stressful decision. Scams are out there, especially in the credit business. The questions in your head will be running wild—”Can I trust them?”, “Are they ripping me off?”, “Will they actually fix what they say they can fix?”. All your questions are justifiable, and for this reason here is a list of the most reputable credit repair companies.
Lexington Law has 3 tiers of services. The first starts at $79.95 per month, then $99.95 per month, and $119.95 per month. Each tier offers different services. For example, tier one offers repair fundamentals. This includes mistakes on credit reports, sending letters to lenders, and finding loopholes to improve your credit score. The second tier includes assistance to improve your score with monthly credit monitoring. And lastly, the third tier, adds identity fraud alerts and personal finance tools into the mix.
At Lexington Law, you can cancel at any time with their month to month policies.
Lexington Law Review is run by lawyers, so it holds a strong reputation, with an A-rating from the Better Business Bureau.
Sky Blue has some of the most affordable rates around. With prices like $59 monthly (with an initial fee of $59).
Sky Blue is a great service, but a simple one. They offer straightforward repair services, like fixing mistakes on your credit report, sending letters to lenders, and looking for legal loopholes to improve your credit score and get it back up to where it should be.
With Sky Blue, you can also cancel as you please.
Sky Blue has also received an A+ rating from the Better Business Bureau and allows you to get a refund no matter the reason within 90-days.
Credit people offers a seven-day trial for $19. They also allow you options like $299 for six months worth of services or $69 monthly.
Credit People is yet another straightforward and simple credit repair company. They will fix mistakes on your credit, send letters to lenders, and find loopholes to improve your credit score.
You are able to cancel at any time, even if you choose to pay for the 6 months up front.
As far as reviews, many people rave about Credit People. However, some were disappointed but at least could get their money back. They received a B on the Better Business Bureau website.
CreditRepair.com is simple in that it offers one tier of service at $99.95.
They offer the basics as other companies do. These include letters to lenders, and finding loopholes to improve your report. They also will speak directly with credit card issuers and credit bureaus to ensure changes are made. They will also monitor your credit after, and track your progress.
With CreditRepair.com you can cancel at any time, and they will only charge you for the month once they have completed the work agreed on.
The company has an A+ rating with the Better Business Bureau, and past clients rave about their customer service.
Ovation also offers tiers in their services, starting at $59 per month, as well as an $89 per month option.
The company has received an A+ rating with the Better Business Bureau and will allow you to get your money back if you are not happy with their services.
How To Improve Your Score:
If you have found yourself with poor credit, take all the steps necessary to fix it. In today’s world, credit in unavoidable.
However, many of you may find that your score is poor due to actions that you took, or mistakes you made. For example, did you make late payments on credit cards, or miss the payments altogether? Maybe your debt levels are too high. In these cases, disputing errors won’t do much for you, as there are no errors to dispute. Instead, you need to make changes in your actions to improve your score.
Some information will take up to seven years to fall off your credit report, however effects of such information will lessen with time. Be sure to make your payments on time, and never borrow more than you can pay back. As long as no new harmful information emerges on your credit score, it should only improve from here on out.
Always remember that a bad credit score can affect you deeply. It can cost you thousands of dollars, while you are only approved for loans with shockingly high-interest rates, as well as costly insurance premiums. Poor credit will hold you back. Want to buy a house? Finance a car? Go back to school? Go on a memorable French adventure? Credit is necessary, so take action now.