What is Credit Repair?

When repairing credit, you’ll work to fix your credit history by removing negative marks or incorrect information. Repairing credit can open opportunities to get a mortgage or secure a business loan. Depending on the damage, you might prefer to hire a credit repair service. 

The fundamentals of credit repair are the same as building credit: paying bills on time, creating a budget, reducing debt and addressing any concerns with lenders or with the help of the Consumer Financial Protection Bureau. Here’s what you need to know to get started. 

How Does Credit Repair Work?

Credit repair is the process of improving or restoring your creditworthiness by addressing and resolving negative items on your credit report. Rebuilding your credit score and credit history involves paying off debt, improving your payment history and disputing incorrect charges. The goal is to remove inaccuracies, errors or outdated information that lowers your credit score. It can also involve rent reporting companies or even hiring a credit repair company to do the work for you. 

Is it Worth Paying Someone To Fix Your Credit?

If you’re ready to buy a home, a car or take a significant loan, a higher credit score can save thousands of dollars in less interest payments over time. A low credit score could mean higher interest rates or that you cannot qualify for a loan at all.

Working with a company that repairs credit may be worth it, especially if you have inaccuracies on your credit report or need to improve your credit score quickly.

While you can dispute any incorrect, outdated or inaccurate information yourself, many people prefer the convenience of a professional service. These companies contact the credit reporting bureaus on your behalf in exchange for a fee. The goal is to improve your credit over time.

What is the Fastest Way To Repair Your Credit?

To repair your credit, start by pulling your credit reports and carefully checking each for errors. You can get copies of your credit reports from all three credit bureaus at annualcreditreport.com. Then, focus on making small, regular payments on all of your accounts every month and reducing high-balance accounts as well as reducing total debt.

You can also use a rent reporting company to get credit for on-time utilities and rental payments. Becoming an authorized user on the credit card of a friend with a high credit score is one of the fastest ways to boost your credit score. 

How Much Does it Cost To Fix Your Credit?

The average cost of credit repair ranges from $10 to $100 for an initial fee. Most companies that repair credit also charge ongoing monthly fees from $30 to $150 per month. Remember that you can also work to fix your credit for free, but you must be willing to review your credit reports, contact lenders and dispute charges or inaccuracies with credit bureaus. 

How Fast Does Credit Repair Work?

Repairing your credit can take anywhere from 30 days to six months, depending on the severity of the situation and the number of mistakes on the credit report. Repairing credit from "fair" scores in the under-600 credit score range to "very good" credit scores above 740 can take a year or more.

Example of Credit Repair

Mike decided to work with a reputable credit repair company. The company thoroughly analyzed Mike's credit reports, identifying the negative items dragging down his score. It then initiated the dispute process, leveraging its expertise in crafting effective letters and gathering supporting evidence. When the credit bureaus didn't respond to the disputes, the company followed up until it received responses, corrections and updates. 

The credit reporting company also worked closely with Mike to develop a personalized credit improvement strategy, including debt repayment and steps to improve financial habits. 

These combined actions led to steady progress in his credit score. Over the course of six months, Mike sees significant improvements in his creditworthiness, opening doors to better loan terms and financial opportunities.

5 Things To Consider with Credit Repair

Keep these benefits in mind as you work to improve your credit score. 

Factor No. 1: Impact of Credit Repair on Credit Scores

Credit repair agencies work to remove negative items and inaccuracies and advocate on your behalf. The first and most important effect of repairing credit is a higher credit score, which can lead to benefits ranging from lower interest rates and better loan opportunities to greater peace of mind.  

Factor No. 2: Access to Better Credit Opportunities

Companies that repair credit can provide access to better credit opportunities, such as lower interest rates on credit cards and loans, increased chances of approval for credit applications and improved job prospects. If you're in the market for a mortgage to buy a new home, the additional mortgage savings can more than make up for the costs of a company that can help repair your credit. 

Factor No. 3: Stress Reduction and Improved Financial Well-Being

Repairing your credit can help reduce the stress that comes with financial struggles and open up new opportunities for financial growth. It can be the first step to making a solid budget and long-term financial plan to reduce debt, build savings, and improve financial security. Knowing you have enough and you're protected can lead to greater peace of mind, better relationships and better financial opportunities. 

Factor No. 4: Enhanced Negotiating Power

A boost in credit score will qualify you for lower interest rates on loans and credit cards. This allows you to save substantially throughout the years. For example, if you qualify for a 30-year mortgage for $200,000 with 6% interest instead of 8% interest, you'll save over $97,000 in interest over the loan repayment period. 

Factor No. 5: Positive Impact on Insurance Premiums and Job Opportunities

You can reduce insurance premiums by repairing your credit, as many insurance companies use credit scores to calculate insurance rates. Some employers also check the credit scores of potential employees, so a higher credit score can increase your chances of being hired. For these reasons, a higher credit score can positively impact insurance premiums and job opportunities.

Advantages of Credit Repair

Improving your credit score has advantages ranging from financial benefits to peace of mind. Here's what you need to know:

Improved Creditworthiness

Improved creditworthiness has benefits ranging from securing a mortgage to getting a credit card with more bonus offers. You can see benefits in insurance premiums, car loans and job opportunities. 

Borrowing Power

A higher credit score can mean lenders are willing to approve higher loan amounts, especially on mortgages and other significant loans. This can mean you can get the home you desire — often even with lower interest rates. A higher credit score can also help secure small business and personal loans. 

Enhanced Financial Opportunities

An improved credit score opens up a range of enhanced financial opportunities, including increasing the likelihood of being approved for loans or mortgages at more favorable interest rates and with lower fees. A better credit score can lead to higher credit limits on credit cards, giving you greater purchasing power and flexibility, and a lower debt ratio, further improving your credit score.

A higher credit score can also improve your chances of securing rental agreements or leases without needing hefty security deposits. In this way, improving your credit score can contribute to a more financially stable and rewarding lifestyle.

Stress Relief

While some surveys estimate that 70% of Americans feel financially stressed, working to raise your credit score can provide valuable stress relief. Taking control of your financing can be empowering. 

Peace of Mind

With stress relief comes peace of mind. Sometimes taking the first step and making a plan can be the way to build greater financial security, take control of your financial future and gain greater peace of mind. When you're on track to pay off debt, build savings and improve your credit score, you could experience an upward spiral of even higher credit scores. Knowing you're on track for the future can give you more time to focus on family, friends and things you love. 

Disadvantages of Credit Repair

While improving your credit score is a major advantage, it can be time-consuming or costly. Here are the cons:

Time-Consuming Process

Going through your credit report point by point and disputing inaccuracies can take significant time. The credit bureaus or lenders might not respond immediately, leading to even more time following up. 

Costs Associated with Credit Repair

Hiring a credit repair company can be costly. While the costs are worth it for interest savings on a major loan or mortgage, the extra costs can add to financial strain or debt if you're already stretched to make ends meet. 

Potential for Temporary Score Decreases

While repairing your credit, you might see a temporary score decrease. Don't be discouraged; instead, continue the process of making on-time payments, removing inaccuracies and decreasing debt to see long-term score increases.  

Credit Repair vs. Debt Consolidation

Repairing credit works to improve your credit score and remove negative marks and inaccurate information. Debt consolidation involves moving several debts with different interest rates, payment schedules or from different sources to a single debt. This can be a debt consolidation loan or through transfer to a credit card with a 0% annual percentage rate (APR) for a year. 

Your Credit Restoration Plan

Credit restoration services, along with your own persistence and commitment to building good financial habits, can bring peace of mind and increase wealth. Taking control of your credit score is something you can do now to improve all financial opportunities in the future. Remember to be patient — consistency and follow-up are the keys.

Frequently Asked Questions