How to Choose Credit Repair Services

creditWhen you find yourself in financial difficulty and know that it has hurt your credit score, you need to take some deliberate steps toward credit repair. There are several ways you can do this, but the sooner you start the credit repair process, the better off you’ll be.

Why Credit Repair Is Needed

Whenever you have low or bad credit, it will cost you. This is especially true if you get behind in your payments. It means that you will be paying more each month in late fees, extra interest, and it will take longer to pay off your debt. Besides this, you will probably be placed into a higher interest bracket, making it harder than ever to reduce your overall debt.

Besides this, anytime you apply for new credit, you will be issued a higher interest rate, which means that you are paying more each month than those people would who have good credit. By restoring your credit score to a higher level, you can get better interest rates on credit cards, loans, and even on a mortgage.  Starting the credit repair process can be overwhelming, but the most important part is that you get started.

You Could Perform Your Own Credit Repair

One thing that some credit repair companies will not tell you is that you could perform your own credit repair. The truth is that no matter who does it, it will take time to get your credit back in good shape. Being consistently on-time with your payments is the key, and always paying at least the minimum amount. These two elements carry the largest weight with the major credit score companies.

Review Your Credit Report

This is essential and it needs to be the first thing you do. Every year, you are entitled to a free credit report from each credit reporting company.  After you get a copy of your credit report, you need to look it over and check to see if there are any mistakes on your report. By contacting the companies that gave you the bad report, you may be able to get it corrected quickly. This is important because this one thing could reduce your credit score considerably, and eliminating bad or incorrect information should raise your score.

How Credit Repair Companies Usually Work

When you go to talk to a credit repair company, they will usually ask you for all of your credit card bills. This will let them know your overall debt and the companies you are dealing with. Then there will often be an attempt made to negotiate some form of debt forgiveness or payment reduction. Be aware that no credit repair company can promise to cut your debt in half or something like that because only the company that you owe money to can do that.

A monthly payment will usually be made to the credit repair company. From this payment, the company will make payments to your creditors each month, and a fee for the services will also be subtracted from the amount.

Things to Watch Out for

The first thing you need to be aware of is that some credit repair companies or online offers are scams. This means you need to read the details carefully before paying for any services. Be very leery of any company that promises to erase all your debt and restore your credit right away. Find out all costs involved and compare them with other companies letting them help you to repair your credit.

Here are some other things to be on the lookout for:

  • They don’t provide a contract.   All reputable companies are required to give you a written contract that lists your cancellation rights as a consumer.
  • They “guarantee” you something.  Nothing is guaranteed to happen.  All they can do is try.
  • They have complaints against them. Check the CFPB complaint database. Also check with your state’s corporate commission offices and your attorney general.  Also check the state where the company has their headquarters.
  • They tell you they can remove negative info that is real.  Stay away from anyone saying they will do something illegal for you.
  • They tell you to lie. Any business that asks you to provide inaccurate information about your credit report is breaking the law.  Stay away.
  • Suggest you create a new credit profile with a false identity. Not as common of a practice but run for the hills.

Things to look for

We just listed what you want to stay away from.  Here is what you want to look for in a reputable credit repair company.

  • They offer you a free consultation. A good credit repair company will take a look at your report and give you a honest picture of what it can and can’t do for you.
  • They have a positive track record.  The longer a company has been in business the better.  If they have been in business at least five years, this means they have been abiding by the FTC rules and are legitimate. Also be sure to ask them if they have handled a situation similar to yours with a positive outcome.
  • They have an attorney on staff.  If they have an Attorney working for them or the business is owned by one, you will know that things should be operating legally.
  • They are clear about your options. What is your next step if they cannot help you achieve your goals.
  • They are in line with local laws. Every business you contact should be licensed, bonded and insured.