Credit Score

Do I Need a Credit Repair Agency?

Comments 6 Comments

We recently received a question from a reader who is looking for advice on how to repair her credit and whether or not using a credit repair company to help is a good idea:

I am presently trying to repair my credit. I have been laid off three times in the past ten years and I have a lot of work to do. What is the best way to get my credit score up? Would it be better for me to pay a credit repair agency to do it for me?

Picking up the pieces and recovering from a financial setback isn’t easy, especially in situations where you’re hit with one financial curveball after another. Losing one job due to a layoff is stressful and financially debilitating enough — being laid off from three jobs would be nothing short of devastating. Understandably, it can also end up causing a great deal of credit damage along the way.

Hiring a credit repair company to help you repair your credit can be tempting. However, unless you truly understand what they do and how they do it, it’s not a strategy I’d recommend. For one, despite their promises to “erase bad credit,” there is no special insider technique that miraculously erases past credit problems. Plus, you can do everything a credit repair company will do — and you can do it for free, without forking out the $39 – $79 a month that many credit repair companies will charge.

What Credit Repair Companies Do

Under federal law, you have the right to dispute inaccurate information in your credit reports. When you hire a credit repair service, you agree to let the credit repair firm act on your behalf in the dispute process. The credit repair company then asks you to obtain all three of your credit reports so that they can go through them line by line and identify any negative information currently being reported. Once they’ve identified all of the negative items, they’ll begin systematically disputing every negative piece of information in your credit reports — whether it’s accurate or not.

By law, the credit reporting agencies have 30 days to open an investigation and resolve the dispute. The investigation process involves validating the item with the data furnisher (the creditor or entity that reported the item). If the data furnisher is unable to validate the accuracy of the item within the 30-day window, the credit reporting agency must delete the item entirely. This is what credit repair companies are aiming for by bombarding the credit reporting agencies with dispute letters.

Why This System Doesn’t Really Work

If credit repair agencies are successful in getting negative information removed, why wouldn’t it be a good idea? Besides the obvious (the information being accurate), there are two big reasons why disputing accurate negative information is a bad idea:

1. Flooding the credit reporting agencies with disputes against accurately reported negative information can backfire. Under the Fair Credit Reporting Act, if the credit bureau determines that a dispute is a blatant attempt to have negative but accurate information removed, your dispute can be flagged as “frivolous.” If this happens, the dispute won’t be investigated and can cause future disputes to be ignored.

2. If the credit reporting agencies are unable to validate the dispute within the 30-day investigation period and the item is deleted, it doesn’t mean it can’t end up back in your credit report later. Even if the credit repair agencies are successful in getting through the 30-day investigation crack, if the item is accurate and the creditor or data furnisher reports an update or re-reports the item to the credit reporting agencies — it’ll end up right back on your credit report.

Do-It-Yourself

Instead of paying a credit repair service to fix your credit, consider going the DIY route. For the price of a stamp and an envelope, you can save your money and file your disputes yourself. Start by ordering copies of your credit reports. You’re entitled to one free credit report from each of the three major credit reporting agencies each year. You can also monitor your credit score for free once a month using Credit.com’s Credit Report Card.

If you find that there is any inaccurate information being reported in your credit report, file a dispute to have it corrected. Because your credit reports and credit scores are only as accurate as the information being reported, this is an important first step to improving your credit.

For more in-depth information on rebuilding your credit and improving your credit scores, Credit.com offers a consumer library of helpful resources including:

Image: iStockphoto

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Danny Bartko

    Deanna, in your personal experience, how often have you had to dispute with credit bureaus?

  • Deanna Templeton

    Believe it or not, Danny, I’ve filed enough of them to know I get better results going the old fashioned route rather than the online dispute process through the bureaus. Having worked in the consumer credit industry for the last 15 years, I’ve had my share of helping friends, relatives and coworkers who’ve had to deal with the bureaus (who are not always the most helpful folks) and the dispute process. And yes, I’ve even had my own errors to dispute due to the almost identical name of a parent who filed bankruptcy back when I was 19 years old. Based on your question and your email address, I’d take a guess that you’ve probably handled many more disputes than I have. The disputes I’ve helped with have always been legitimate errors so my results may be different than those where the dispute is to remove accurate (but negative) information. I appreciate your question and the point you’re trying to make, it’s a valid one for sure. In fact, I’d actually be interested in speaking with you about your business if you’re willing. I’d be curious to hear your perspective, not so much on the operations side of the credit repair industry, but more from a consumer cost and benefit standpoint. If you’re open to an interview, email creditexperts@credit.com and I’ll be in touch.

  • Denise

    Experian shows that I’m deceased because when I closed my Kohl’s charge card, the rep. accidentally marked me deceased instead of customer closed account. After I got that straightened out, I sent a notarized letter with a copy of my birth certificate to Experian stating that I am alive and Kohl’s made an error when I closed my account.
    This was months ago and I am still marked deceased. What can or should I do?

    • http://www.credit.com/ Credit.com Credit Experts

      Unfortunately, you’re not alone in having a problem getting yourself declared alive. We wrote about it here: My Credit Report Thinks I’m Dead

    • http://www.credit.com/ Credit.com Credit Experts

      We’ve sent you an email

    • http://www.credit.com/ Credit.com Credit Experts

      Denise —
      Experian is trying to get in touch with you via email . . . could an email filter be getting in the way? It might be worth checking your spam folder.

Find out where you stand.
Get your FREE personalized credit report card.

Sign Up Now
X

Stay Connected to Our Experts

Please submit your email address to get credit & money tips & advice
from our team of 30+ experts, delivered weekly to your inbox.