Late night TV and radio ads claiming that a credit repair company can instantly increase your credit score may cause you to think you've found a solution to your problem. Unfortunately, these companies aren't all they're cracked up to be. In fact, certain credit repair companies may have you committing fraud.
What Credit Repair Companies Do
A credit repair company can review your credit history and negotiate with the credit bureaus on your behalf to remove inaccurate data. This can work well for someone who doesn't have the time to write his own dispute letters. Some credit repair companies will also work with your creditors to decrease your interest rates or settle the debt for less than you owe.
What They Can't Do
A credit repair company cannot legally dispute negative remarks on your credit report if they are valid, though some do this anyway. The repair company also will not help you to make timely payments on your bills, which accounts for a large percentage of your credit score.
Credit Repair Scams
A company cannot guarantee you an increase in credit score. If you have no erroneous information on your credit report, then there is nothing the company can do to improve your score. Some companies will send the credit bureaus a letter disputing every aspect of your report. A loophole means that the company will have to remove the item if they don't respond within 30 days. If the information is accurate, however, this constitutes fraud. Some credit repair companies will even take your money and not do anything at all.
Fixing Your Own Credit
A credit repair company cannot do anything that you cannot do on your own. You can review your own credit report and send a letter to the bureaus to dispute inaccuracies. You can also negotiate with your debtors. Fixing these things may give your credit score a slight boost, but consistent financial responsibility over time is the only thing that will significantly increase your score.
Maggie McCormick is a freelance writer. She lived in Japan for three years teaching preschool to young children and currently lives in Honolulu with her family. She received a B.A. in women's studies from Wellesley College.