credit fixing companies work to remove inaccurate or damaging information from consumers’ credit reports. They also help educate people about good financial habits. Some credit repair companies, such as Lexington Law and Credit Saint, offer a money-back guarantee. Others, like The Credit People, provide a free consultation and a comprehensive review of credit reports.
Legitimate
Credit repair companies that promise a quick fix for credit problems may sound tempting, but it takes time to build good credit. While credit repair companies can help you dispute errors on your report and get them removed from your report, they cannot erase negative information like bankruptcies or late payments. If a company promises to remove such items from your report or advises you to misrepresent information to the credit bureaus, run away. They are likely scams that could cost you a lot of money and legal trouble in the long run. A legitimate credit repair company will always be transparent with their customers.
Scams
Credit repair scams target financially distressed consumers with bad credit. These companies often charge up-front fees and don’t deliver on their promises. They may even violate federal credit-repair laws and engage in illegal practices, such as disputing accurate information in a consumer’s report or creating a new credit identity.
Scams also include claiming to remove negative items from your credit history that are legitimately reported. This is impossible and illegal. The only way to improve your credit is to build a positive financial history by paying your bills on time and maintaining low debt levels.
Other credit-repair scams include promoting “credit piggybacking” whereby a consumer is added to the credit report of someone with a better score. This is done by registering the person as an authorized user in name only without giving them access to any accounts or lines of credit. These sham operations can be prosecuted under the federal Trade Commission Act.
Fees
A bad credit score can cost you a lot of money in the long run. This is because you’ll pay more for credit cards, loans, mortgages, and even cars. However, it’s possible to repair your credit by disputing inaccurate information with the credit bureaus and data furnishers that supplied the information. Most credit repair companies work on a subscription-based model and charge monthly fees ranging from $50-$150 per month. Some also charge a one-time startup fee (also known as the first work fee) that can be up to $200. However, most of these companies offer a 90-day money-back guarantee. This way, you can try them out and see if they are worth the investment.
Some credit repair companies even offer identity theft protection services, which can be useful for small businesses.
