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What are credit repair companies and how do they work?

minute read

    What are credit repair companies?

    If you are in the thick of serious debt and/or have seen significant drops in your credit score, it can be tempting to search for a quick and easy solution to restore your credit. While there is no magic solution for fixing a poor credit score, there are ways to help improve and maintain a credit score.

    Amidst your research, you may have come across a list (or seen various advertisements for) credit repair companies. These are third-party organizations that address updates to your report with the three main credit bureaus—Experian™, Equifax® and TransUnion®—on your behalf. Additionally, they may help you sort through your debt and set up a plan to improve your credit.

    Note: Chase does not offer these services, but Chase has other resources available to you that can help improve your credit score at no cost, such as enrolling in Chase Credit Journey®.

    Some credit repair companies can be helpful, but not all of them are created equal. It's essential that you tread very carefully with any company claiming to repair your credit. Some can scam you into paying lots of fees for services that you may not necessarily need. In fact, much of the work that goes into improving your score can be done on your own with a little help and research.

    How can credit repair companies help me rebuild my credit score?

    One way a reputable credit repair company can assist you with rebuilding your credit score is by helping you to consolidate your debt. If you're behind on payments and your debts have become unmanageable, these companies can help find ways to restructure your debt and create a plan to refinance or rearrange your current agreements.

    Additionally, in the rare case, they may aid you by removing inaccurate information from your credit report, such as incorrect derogatory remarks that could be damaging your score.

    Services offered from credit repair companies include, but aren't limited to:

    • Credit monitoring
    • Disputing incorrect information on your credit report
    • Debt management plans

    Advantages and disadvantages working with a credit repair companies

    When it comes to your credit score, it's important to be both savvy and diligent. That means having all the information you need to make the right decision for you. Let's weigh the advantages and disadvantages of credit repair companies so you can decide if working with one is right for you.

    Advantages of credit repair companies

    Repairing your credit can be a time consuming and complicated process. If you're a busy individual and have little time to do all the work necessary to make adjustments to your score, it may be appealing to pay someone else to do this for you. A trustworthy credit repair company can be a way to save you time and offer expertise you may not otherwise have access to.

    In short, the advantages of working with a credit repair company include:

    • Saving time
    • Getting access to additional services like credit monitoring or debt management plans
    • Access to expertise and guidance
    • Depending on the company, some may offer a money back guarantee if your score does not improve

    Disadvantages of credit repair companies

    Does the above sound a little too good to be true? Be wary—many credit repair companies are out there to steal your information or get you to pay excessive amounts of money for services that you could otherwise do yourself.

    Many organizations may present you with unrealistic levels of success. Others might offer you "solutions" that you would have been able to find yourself, such as free educational content and helpful guides from trusted entities like banks, financial service companies and even government entities.

    The disadvantages of working with credit repair companies include, but aren't limited to:

    • Potential for being scammed and/or misinformed
    • Paying hundreds of dollars (if not more) for solutions that you could find for free
    • Paying for a service and still not seeing your score improve
    • Putting your sensitive information (like your Social Security number) at risk

    How can I rebuild my credit myself?

    Despite some of the pros of credit repair services, the better option is to find a way to repair credit yourself. While it may take some time initially, you'll be saving yourself the cost (and potential hassle) of working with credit repair companies.

    Below are a few ways you can start rebuilding credit on your own:

    • Create your own debt management plan to consolidate your debt
    • Consider refinancing where possible (for example, refinancing a mortgage or a home equity line of credit)
    • Improve payment history by making your monthly payments in full and on time as often as possible
    • Lower your credit utilization ratio by spending less and/or keeping your credit card accounts open, active and paid—but never maxed out
    • Use features in Credit Journey® like credit planning to help set a score goal and a timeframe in which to achieve it
    • Monitor your credit and sensitive financial information using Credit Journey's credit monitoring and identity monitoring services

    The bottom line

    Keep in mind the old phrase, "If it sounds too good to be true, it probably is." In many respects, that's a way to think about credit repair companies.

    You can essentially do anything a credit repair company can, and at no cost. While it may take some time to get a firm grasp on your financial situation and how you're looking to improve your credit, you have all the tools to make empowering choices for yourself. If you do seek guidance from a third party, be sure to do your due diligence and confirm that they are a reputable, trustworthy resource.

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