Credit Repair

How to Find a Good Credit Repair Company

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Credit repair companies have a reputation of being scam artists out to take advantage of naive consumers.

In recent years, the FTC has found credit repair companies guilty of lying to credit bureaus about information in people’s credit reports, illegally collecting fees before performing any services and, in one notably bold scam, promoting a business named “FTC Credit Solutions” that erroneously claimed to be licensed by the FTC.

That being said, scams aren’t necessarily rampant. The Consumer Financial Protection Bureau reported nearly half a million complaints from Jan. 2017 to June 2018, but a small fraction — just over 800 — were related to credit repair.

While there are bad apples in the space, there are also good, reputable firms that help consumers improve their credit scores by removing errors and negotiating with creditors on their behalf.

Here are some tips and insights on how to find a good credit repair company — and what to avoid.

What credit repair firms do — and what they don’t do

DIY credit repair can be intimidating, time-consuming and difficult. Credit repair companies can help you understand the laws, rules and guidelines governing the credit system, cut through red tape and help you work with the credit bureaus.

Twenty years ago, credit repair companies had “a presumptive black eye,” said Atlanta-based credit expert John Ulzheimer, formerly of FICO and Equifax. But “now you have absolutely 100% legitimate companies that try to do a good job for their customers.”

For a fee, these companies work to get your finances back on track by helping remove erroneous, inaccurate and unverifiable items from all three of your credit reports. They will professionally prepare dispute letters. But they can’t promise, guarantee or predict their services will improve your credit score or that you will be approved for a loan.

Credit repair companies may also take educational steps aimed at improving your understanding of credit and the importance of making on-time payments for all of your obligations.

But credit repair companies can’t remove legitimate negative information that is accurate and timely from your credit report.

The Credit Repair Organizations Act prohibits “untrue or misleading representations and requires certain affirmative disclosures in the offering or sale of ‘credit repair’ services.”

The act bars credit repair companies from demanding advance payment, requires contracts to be in writing and gives consumers certain contract-cancellation rights.

According to the CFPB and the FTC, red flags include:

  • The company pressures you to pay upfront fees.
  • The company instructs you not to contact credit reporting companies.
  • The company promises you a “new credit identity” to help you hide bad credit history or bankruptcy for a fee.

The FTC warned that credit-repair scams sometimes direct consumers to apply to the IRS for an Employer Identification Number (EIN) and then tell consumers to use the EIN rather than their Social Security number on loan applications.

Consumers who lie on a credit application, misrepresent their Social Security number or obtain an EIN from the IRS under false pretenses are violating federal law.

How to find a good credit repair company

There are steps you can take to find a reputable company that can help you make a fresh start to get your credit back on track.

Do your research. Develop a list of potential companies, and check them out with your Better Business Bureau, state Attorney General’s office and local consumer protection agency.

Ask for information about their services. Credit repair companies must detail in a written contract their services and your rights. They also must explain the total cost you’ll pay and how long it will take to get results.

Check with NACSO, a nonprofit industry association of credit repair organizations, to make sure a firm is accredited. Go to nacso.org, where you’ll find a list of accredited companies in your state. Before a company is approved, it must provide information and background on the company and its officers, adhere to guidelines set by appropriate governing agencies, provide client support options including support phone numbers and/or email addresses and have been in business for at least six months.

Don’t believe promises that seem too good to be true. Beware of just jumping on the internet because you might find a lot of firms that make excessive promises, said Jim Droske, president of Illinois Credit Services, a Plainfield, Ill.-based credit repair organization.

“There’s nothing magical or mysterious about credit repair,” Droske told LendingTree. “It’s based on laws.”

Credit repair fees and fine print

Be sure the company is upfront and transparent about when and how it charges fees. If a company promises to create a new identity or hide your bad credit history, be alert. It’s likely a scam.

  • If you sign up for credit repair with any company, you can cancel your contract for any reason within three business days at no charge.
  • Many firms charge a “first work” setup fee, billed after enrollment, to get the ball rolling and then a monthly fee for additional services completed the prior month.

As an example, Droske’s firm charges $189 for individual credit repair and $239 for joint repair for all setup, analysis and first dispute letters. Consumers aren’t billed until 14 days after enrollment. After that first work, individuals are charged $99 per month. Joint credit repair is $149 per month. There is no long-term contract, no cancellation fee and consumers can cancel anytime.

At Ovation Credit Services, a LendingTree-owned firm, plans range from $89 for first work and then $99 monthly to $114 for first work and then $69 monthly. There is a couple’s discount (20% total). Senior and military discounts are also available.

Amy Myers, senior director, account management for Ovation, compares professional credit repair to using an auto mechanic.

“You can change out your own transmission as an individual. But it’s better to rely on somebody who understands what’s happening and all the intricate parts that go along with it in order to get the best results,” she said.

Ovation assigns a case advisor to each client to provide personalized service and has “an ability to dispute any … type of accounts with success,” whether it’s student debt, medical debt, unsecured debt, mortgages, bankruptcy, liens or judgments, Myers said.

The bottom line

If your credit is less than golden, you can take steps to repair it. But it will take time. Be aware of your rights and do your homework when looking into credit repair companies. That will be vital to your financial well-being.

 

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