Consumers today who are struggling with poor credit history may consider seeking assistance from a reputable credit repair company that can help with fixing their bad credit. Keep in mind that most of these companies charge initial and ongoing fees for providing these services.

The Federal Trade Commission explains that fraud is common in this industry and consumers must do their homework before entering an agreement with a credit repair agency.

What is a Credit Repair Company?

Credit repair organizations emerged shortly after the implementation of the Fair Credit Reporting Act in 1970. Credit repair services work on behalf of consumers with negative items on their credit history, such as missed or late payments on debts.  

A credit repair service will access your credit reporting agency files compiled by the three major credit bureaus: Equifax, Experian, and TransUnion. Credit Karma describes the role of a credit repair company as a service that will do the “heavy lifting” for consumers.

A credit repair service is distinct from a credit counseling agency, which provides advice and education, such as strategies for managing existing debt, improving your credit utilization rate, budgeting, and responsibly assessing new credit accounts.

In 1996, the Credit Repair Organizations Act (CROA) was established for regulating the credit repair company market. The Consumer Financial Protection Bureau (CFPB) is the primary agency handling enforcement of the CROA.

How Do Credit Repair Companies Work?

A credit repair company will review a consumer’s credit history and identify any existing negative information. Next, the credit repair company communicates with either the credit bureaus or the companies that reported the negative information associated with any debt.

The company that has furnished or reported unpaid debts or other forms of adverse payment history to the credit bureaus is typically a third-party debt collector; however, it might be the original lender associated with the debt such as a bank or credit card company.

A credit repair company will dispute any negative information that was incorrectly reported on your behalf with the intent of having the adverse entry deleted or modified in a way that reflects favorably on the consumer.

Among the most commonly deployed tools are debt validation letters. Here, a letter challenging the “validity” of the debt requests that the lender or collector present written evidence that confirms the consumer owes a debt, which they might struggle to locate in a timely manner.

Experian states how some unscrupulous companies in the past tarnished the credit repair industry’s reputation. For example, by deploying tactics, such as repeatedly sending dispute letters to parties who reported adverse information — a process known as “jamming.”

The jamming strategies inundate lenders, collectors, and credit bureaus with disputes, which increases the likelihood that a recipient would fail to properly process them within 30 days — the deadline imposed in the provisions of the FCRA.

Are These Companies Legit?

Federal law permits the operation of any credit repair company that complies with the CROA guidelines. In recent years, the Federal Trade Commission (FTC) and the attorney generals of most states have curtailed illegal industry activity.

The FTC recommends that consumers look for the following signs that suggest fraudulent activity as follows:

• The company insists or pressures you to make advance payments before providing any services.
• They discourage you from directly contacting any credit reporting company or bureau.
• The company suggests filing a dispute alleging that a reported debt is inaccurate that you know is correct.
• They suggest providing any type of false information.

Consumers must insist that all terms are clearly presented in writing before entering an agreement with a new credit repair company. The CROA also allows consumers a three-day “cancellation period” without penalty.

The CFPB has now compiled and regularly maintains a Consumer Complaint Database of companies within the financial services sector that were the subject of complaints. The Better Business Bureau (BBB) is another potentially viable resource for researching these companies. 

How Much Does Credit Repair Cost?

According to Experian, companies involved with repairing or improving the credit rating of consumers typically use one of two payments or fee arrangements. The first is a subscription model where the company is paid each month, which often ranges from $50 to $100.

Another common industry fee structure is referred to as “pay per delete.” Here, the credit repair company receives compensation after their efforts successfully have an adverse credit bureau report entry removed (deleted).

The following summary outlines the fee structures that several well known credit repair companies promote. Ovation Credit Services claims they represent the best credit repair company for couples, seniors, and members of the military.

Ovation Credit Services offers an Essentials option for $79 a month or an Essentials Plus plan for $109 a month. 

The Essentials Plus plan requires an $89 initial fee but includes unlimited challenge validation letters and creditor goodwill letters, as well as credit monitoring of your TransUnion report.

Sky Blue Credit Repair offers a plan with a $79 setup fee and a $79 monthly fee. They market the plan as an “all-inclusive” solution that includes debt validation challenges, goodwill letters, and cease and desist letters for stopping repeated calls from debt collectors.

Credit Saint now offers three available credit repair options with an initial fee ranging from $99 to $195 and monthly charges of $79.99 to $119.99. All options include debt validation letters, “intervention” credit counseling (coaching) services, and Score Tracker credit monitoring.

How Long Does Credit Repair Take?

You should not expect immediate results after enrolling in a credit repair program. For example, if your credit report contained an inaccurately reported adverse credit entry, there will be lapses of time in disputing the error, time for investigatory review, etc.

In many cases, it will take up to six months or more before some progress is evident and your credit score noticeably improves. Ask your credit repair company about their expectations. 

Keep in mind that many of these providers also include regular updates for tracking your progress.

Another consideration is that a single adverse credit entry might exist on two or more of the three major credit bureau reports with Equifax, Experian, and TransUnion; therefore, the process could require additional time.  

Keep in mind that the majority of adverse credit report entries automatically fall off your credit report in seven years, with some types of bankruptcy extending to 10 years. With good timing, you might notice improvement regardless of the credit repair company’s activity.

For example, if you initially entered an agreement with a credit repair company just before a major bad credit event, such as bankruptcy, and are approaching the 10-year mark, you might unexpectedly enjoy a good credit score boost.

Can I Fix My Credit By Myself?

According to TransUnion, a consumer can independently work toward improving their credit score using the same strategies as a credit repair company would. Further, TransUnion explained that such do-it-yourself work might produce faster results and will save you money.

Equifax also agrees that consumers may obtain similar results in repairing their credit and boosting their credit score without assistance from a third-party service provider. Equifax also reminds consumers that there is rarely any “quick fix” for dramatically improving your credit.

Although the current credit repair company regulations prohibit making any “guarantees” regarding efficiency, many of these organizations create impressions that suggest their expertise in the realm of credit repair translates to faster results.

In today’s digital age, the major credit reporting bureaus have simple and easy-to-use website applications for filing disputes and otherwise communicating with them. 

Consumers seeking to improve their credit themselves should always begin by obtaining a recent copy of their credit report. Fortunately, all three credit bureaus now provide a free credit report upon request once each year.

Ways to Build Credit

While you’re addressing negative items on your credit report, it helps to also put new items on it. For example, CreditStrong is a Texas-based division of an established bank that received a 5-star rating that provides credit builder loans.

A credit builder loan is a special type of installment loan that deposits the “borrowed” funds into an FDIC-insured savings account. In the months that follow, the individual makes a single, fixed payment toward the balance of the loan.

Throughout the term of a credit builder loan, CreditStrong reports all loan payment activity to the major credit bureaus; therefore, consumers have an excellent opportunity for establishing a positive history of responsible credit usage that can positively impact their credit score.

At the satisfactory conclusion of the loan term, the funds that were secured in the savings account are made available.

Another possible credit repair strategy involves acquiring a secured credit card. A secured credit card requires an initial, refundable security deposit, which is typically equivalent to the maximum credit limit on the account.

Secured credit cards function in the same manner as a traditional credit card account. Using the card responsibly and making timely monthly payments may improve your credit profile and likely enable you to qualify for an unsecured credit card.

Credit repair companies provide a service that may benefit consumers seeking to improve their bad credit history — particularly, as a convenience for very busy people.

Consumers should remember that they can perform the same steps for potentially improving their credit as the credit repair companies take if they take the initiative. 

CreditStrong helps improve your credit and can positively impact the factors that determine 90% of your FICO score.

Start Building credit today