Paying for Credit Repair vs. Do It Yourself (DIY)

Credit repair companies do not necessarily have access to special tools that a consumer does not, so you may ask why would credit repair be worth the associated cost? In most cases, using a DIY form of credit repair may be the better bet. The simplest way to build credit in the long term is by simply applying for a secured credit card and making use of credit builder loans. As a broad-based approach to credit, good credit habits will win over the long term as opposed to short term gimmicks. However, if you have erroneous marks on your credit report that is a different story and you might want to consider filing disputes on those trade lines. In this scenario, a credit repair company will have more experience than you and could be beneficial.

Benefits of Credit Repair

The main benefit I’d see from using a company is that there are many laws and regulations regarding credit repair and how items get removed from bureau reporting, that the average consumer will not realistically have the time to properly research and create an executable plan from. The main benefit of using a company is that a good credit repair company will know the ins and outs of what is going in the credit repair industry at the present time. Their experience will be the most valuable asset a typical consumer won’t have. Other than that, there is nothing special about the services they provide. If you are a DIY type of individual, you may consider doing it yourself and saving all associated fees and costs.

Regulations

Moreover, consumers should also understand that credit repair companies are highly regulated and if you feel money was taken without any service being provided they are in direct violation of the CROA (Credit Repair Organizations Act) law. It is illegal to promise a service and not render it, so if you feel you’ve been charged and no service has been provided you should reach out to the FTC and files complaints with the BBB. The CROA aims to protect consumers so it’s best to always know you rights when working with an agency. Credit Repair companies cannot provide you with a guaranteed credit score improvement. For the most part, credit repair is hit or miss. Sometimes, the services rendered are successful, but sometimes they are not.

If you do choose to go with a credit repair company consider the following:

• Try to avoid front-loaded pricing and fees. The price point you pay should really be dependent upon the work the credit repair company performs. If your company has their fees front-loaded they are less incentivized to do their best work since fees since they get paid early on regardless of the services performs.

The one scenario in which credit repair can have an outsized impact on your personal finances and be worth the associated costs are if you are home shopping and plan on acquiring a mortgage. From experience, this is really one of the cases in which a rapid credit repair service may very well be worth the associated fees, since if successful, it will typically save you thousands on the interest rate of your mortgage. This can be a shot in the dark in many scenarios but for many consumers that’s it’s still a shot worth taking.

If you don’t plan on utilizing your credit in the short term, credit repair may not be the best way to spend your money right now. Don’t do credit repair just to do credit repair. If you have bad credit, good credit habits can help your credit outperform in the future so that you might be able to avoid paying for credit repair altogether.