If you’ve been working on getting out of debt and improving your credit score, you’ve likely come across credit repair companies during your journey. This encounter leads to a lot of questions about what credit repair companies do, if the process works, or if it’s all just a scam.

Here’s everything you need to know about credit repair companies, so you can determine if this course of action is right for you.

What is a Credit Repair Company?

A credit repair company is a service that reviews your credit report and works with creditors and reporting agencies to improve your credit score. This task is accomplished by flagging negative items, such as collections payments, and reaching out to the creditors to validate the information. If the information isn’t validated within the legislated time period, the credit repair service files a dispute to have the item removed.

As you learn about how credit repair companies work, you might discover that they aren’t offering anything that you couldn’t do yourself— and you’d be right. You can follow the same steps of the process and even gain access to affordable software programs that can help create letters and track your progress.

The benefit of working with an experienced credit repair service is the knowledge they offer, as well as the time spent going back and forth with creditors.

What do Credit Repair Companies do?

It’s important to understand what a credit repair company can do and can’t do before proceeding. A credit repair service can look at your report and challenge negative items. They know who to contact and can efficiently follow the right channels to have inaccurate information removed from your report. A credit repair service can even file paperwork to get creditors to stop calling you at certain times or places.

What does a Credit Repair Company not do?

A credit repair company isn’t a guaranteed solution for fixing your credit score. While they can dispute items, they can’t remove anything that’s rightfully there. For example, if you missed a car payment and it went to collections two months ago, it’s rightfully on your credit report. However, if you did the same thing ten years ago, past the statute of limitations, they can have that wrongful item removed.

These services can’t make any guarantees or give you a clean slate. If they promise these solutions to you, run in the other direction. It’s also important to note that credit repair agencies aren’t legally allowed to take your money before they’ve offered a service. If they want to be paid upfront, that’s a red flag.

What to Look for in a Credit Repair Company

Reputation is everything when looking for a credit repair company. While the Credit Repair Organizations Act (CROA) has helped mitigate the scammers, there’s still a lot of fraudulent service providers out there. 

Look for a credit repair company with proven results that promotes transparency. They should have a discussion with you before agreeing to help and provide realistic expectations about what they can and cannot accomplish.

Is a Credit Repair Company Right for Me?

Credit repair companies can help those who feel overwhelmed by the process of reviewing and improving their credit score. However, it’s important to note that you can do the work on your own. 

Using a credit repair service will cost you money with no guarantees, making it risky if you’re already in a precarious financial situation. Using this service also fails to help improve your financial literacy and create a healthy money mindset that sets you up for success in the future.