If you're looking to boost your credit score and clean up your credit report, there are numerous “credit repair” organizations that will offer help—for a fee. But using a for-profit company that claims it can repair your credit is almost always a bad idea. Many credit repair companies charge high prices to do things you can easily do yourself. Other companies are outright scams. Read on to learn more about why you probably shouldn't use a credit repair organization.
No matter how persuasive and attractive a credit repair company’s services seem, in almost all cases, you’ll be better off avoiding these outfits. Here’s why.
Credit repair companies usually promise to remove incorrect information from your credit history, but you can easily handle correcting any errors on your own. (Learn how to dispute incomplete and incorrect information in your credit report.)
Credit repair companies are often more interested in getting paid than in actually assisting you—sometimes taking your money and disappearing—leaving your credit history no better, or perhaps worse, than before. Even assuming that a credit repair company is legitimate, it can’t do anything for you that you can’t do yourself. What they will do, though, is charge you hundreds or thousands of dollars for their unnecessary services.
Credit repair organizations sometimes make assurances that they can remove correct, though negative, information from your credit report. But negative items in your credit history can legally stay there for seven or ten years if they’re accurate. No one can magically make them go away. (Learn about what’s in a credit report.)
Credit repair organizations typically try to take advantage of the law requiring credit reporting agencies to verify information if a customer disputes it. In some cases, a credit repair company might challenge most or every item in a credit file—negative, positive, or neutral—with the goal of overwhelming the credit reporting agency into removing information without verifying it. Or they dispute the same item over and over again.
Credit reporting agencies are well aware of these tactics and can legally disregard these challenges on the ground that they are frivolous. And creditors that furnish your credit information to the reporting agencies do not have to investigate your dispute if they reasonably believe that the dispute is submitted by, prepared by, or is submitted on a form supplied to the consumer by a credit repair organization.
You're better off getting copies of your credit reports from the three major credit reporting agencies—Equifax, Experian, and TransUnion—and selectively challenging items that are incomplete or inaccurate on your own. (Learn the difference between a credit report and a credit score.)
Credit repair organizations sometimes use fraudulent, deceptive, and even illegal tactics. For example, in a scam is called “credit file segregation” or “file segregation," some companies suggest that you create a new identity by applying for an IRS Employer Identification Number (EIN), a nine-digit number that resembles a Social Security number, and use it instead of your Social Security number when you apply for credit. (An EIN is used by a business to report information to the IRS.) This practice is illegal. It’s a federal crime to make false statements on an application for a loan or credit, and to misrepresent your Social Security number and get an EIN from the IRS under false pretenses.
If you’re still tempted to use a credit repair organization even after reading about all the downsides associated with using this type of company, you should do the following before hiring one:
If you need help or advice about how to repair your credit, instead of dealing with a credit repair organization, consider talking to a reputable lawyer or an accredited nonprofit credit counseling agency. The National Foundation for Credit Counseling website is a good place to start looking for one.