Introduction
Credit score is very important in the financial aspect of life since it defines your capability to borrow money, get loans, and even get better interest rates. However, if your score fell significantly because of unpaid bills, high credit card balance, or mistakes on your credit report, then you might look for credit repair services. Many credit repair companies claim they can assist you in fixing your credit problems and boosting your credit score within no time. But are they worth the investment?
At Middlesex Healthcare Federal Credit Union, we understand that managing your credit can be challenging, and we aim to provide you with the knowledge needed to make informed decisions. In this article, we will explain what credit repair companies are, how they operate and whether they should be used to fix one’s credit profile.
- What are Credit Repair Companies?
Credit repair companies are firms that engage in providing services that aim at assisting consumers fix their credit scores by challenging credit reporting agencies, creditors and providing consumers with recommendations on how to deal with credit reporting firms. These are companies that work for you and the credit bureaus where they claim to help you get negative items removed from your credit reports.
The main argument that credit repair companies make is that they do it for you, and it would take you a lot of time to do it yourself. But, what is often left unsaid is that credit repair companies can only assist in removing negative items from your credit report that are misleading or old if they were never actually valid in the first place, such as missed payments or high credit card balances.
- How Do Credit Repair Companies Work?
When you hire a credit repair company, they typically begin by obtaining a copy of your credit report from the three major credit bureaus—Equifax, Experian, and TransUnion. They will then review your credit report for errors, such as incorrect late payments, accounts that don’t belong to you, or other inaccuracies.
Once they identify errors, the credit repair company will submit formal disputes to the credit bureaus on your behalf. The credit bureaus are legally required to investigate these disputes and respond within a specific time frame, usually 30 days. If the disputed information cannot be verified or is found to be inaccurate, the credit bureaus must remove or correct it.
Credit repair companies may also negotiate with your creditors to have certain items, like late payments or collections, removed from your report, although this is often difficult to achieve. Additionally, they may provide personalized advice on how to improve your credit, such as paying down high balances or establishing a better payment history.
- Do Credit Repair Companies Really Work?
The effectiveness of credit repair companies largely depends on the individual’s credit situation. If your credit report contains errors, hiring a credit repair company could be beneficial, as they have experience navigating the dispute process and can handle the paperwork on your behalf. For example, if a credit bureau mistakenly reports a missed payment or incorrectly lists an account as delinquent, a credit repair company can help correct these inaccuracies.
However, it’s essential to understand that no credit repair company can guarantee specific results. They cannot legally remove accurate, negative information from your credit report, such as missed payments or high credit card balances. If your poor credit score is due to legitimate issues, a credit repair company’s ability to improve your score will be limited.
Moreover, most of the service that credit repair companies provide can be done on your own if you have the time to do it. Consumers can challenge errors on their credit reports themselves, and they can communicate with creditors independently.
- The Expense of Credit Repair Companies
Credit repair services are not cheap, and the fees that you will be charged will depend on the company you hire and the services they offer. There are some companies that offer to work for a fixed price, and there are companies that work under the monthly subscription, which cost between $50 and $150 monthly.
If you are in a bad financial position or you have debt problems, then paying for the services of a credit repair company might not be reasonable since you can do most of the credit repair on your own for free. At MHCFCU, we suggest our members look into free credit repair and decide if they need to hire a third party to do so.
Bottom Line
Credit repair firms can be useful in some circumstances especially when your credit report is wrong. However, for most people the services they offer can be completed independently with some effort and time. In case your credit problems are valid and rooted in missed payments or high credit, changing your behavior is the only way to go.
Middlesex Healthcare FCU is quite unique because we always encourage members to play an active role in managing their money. Here we are to help you with credit repair no matter whether you are going to do it on your own or considering joining a credit repair company. It is therefore possible for you to be financially wise and get a better score in credit and hence a better future.
For more information on credit repair or to discuss your credit situation with one of our financial advisors, contact Middlesex Healthcare FCU today.
