If you don’t know where to start or where to go with do-it-yourself credit repair, you’ve probably considered using a credit repair service to help fix your bad credit. These credit repair companies typically promise to clean up your credit report, for a fee of course. Credit repair company fees range from $500 to $5,000 depending on the company and the services they provide. While the credit repair promises may sound appealing, there are some things to be careful about when you’re dealing with a credit repair company.
Scam Companies
The company could be a complete scam. There are some fake and semi-legitimate credit repair companies who are only out for your money. These types of companies convince you to pay for their services upfront. Then, once you’ve handed over your hard-earned money, the company vanishes. Your attempts to contact someone at the company are unsuccessful and the company may even take down their website. When this happens, you have almost no hope of ever getting your money back.
Wiped Out Credit Reports
Credit repair could work, but leave you just as bad as before. In all honesty, there are some credit repair companies who follow through on their promises to remove all negative activity from your credit report. In fact, they may remove everything from your credit report or create a new identity for you using one or several illegal methods. Unfortunately, brand new credit that results from a new credit file is just as hard to work with as bad credit.
If your credit file is completely empty, you won’t have a credit score – something that most lenders and credit card companies require before they’ll give you a loan or credit card. You’ll still have trouble getting credit cards and loans and you probably won’t be able to get something as big as a mortgage or car loan. You have to build your credit history from scratch.
Insignificant Authorized User Accounts
Another credit repair tactic involves adding you as an authorized user to the account of someone with a long, positive credit history. You’re added to the account just long enough for the good history to appear on your credit report, then you’re removed. If you add enough positive accounts, they’ll overshadow the negative information on your credit report, if there’s any negative information left.
Unfortunately, the most widely-used credit scoring model – the FICO score – has figured out how to recognize these rented authorized user accounts and having them on your credit report won’t help. The Vantage Score, sold by Experian and TransUnion, doesn’t consider any authorized user accounts, even if they’re positive.
Using Credit Repair Services
If you’re going to use a credit repair company, it helps to know exactly what the company plans to do to repair your credit. In fact, Federal law requires them to describe their tactics upfront. Once you find out how the company plans to repair your credit, then do your own research to figure out whether these tactics will help you or hurt you.
