Are Credit Repair Services Legitimate

Are Credit Repair Services Legitimate?

Here at we don?t go more than a day or two without receiving a question or two about how effective?credit repair services?are and if the credit repair services that we review work, are legitimate and even if they?re worth the price. Credit repair is a very controversial topic because there are excellent companies in the industries that are legitimate and then there are those companies in the industry that are not legitimate. The Federal Trade Commission and the credit reporting industry (Experian, Equifax, Transunion, etc.) don?t want credit repair service organizations helping the consumer. On the other hand, credit repair service organizations value their own work extensively and there are a great deal of different claims from different companies in the industry.

Credit Repair Explained

Credit repair is the process by which a consumer initiates into a contractual agreement with a credit repair service organization to act on their behalf (as their representative) to dispute negative or erroneous information on the consumer?s credit reports for the purpose of removing those negative items and potentially improving the consumer?s credit worthiness. The Credit Repair Organizations Act (CROA) identifies these third party companies as Credit Repair Organizations or Credit Repair Service Organizations. The Credit Repair Organizations Act is the Federal law that oversees and controls how Credit Repair Services Organizations advertise, bill, and how they complete contractual activities. To put it simply, they make sure that a credit repair company is 100% legally compliant with the law and the consumer is protected. The Credit Repair Organizations Act does not manage how a credit repair company disputes negative or erroneous items on a consumer?s credit report. Typically, the credit repair service organization sends out dispute letters to challenge the accuracy/validity of negative items. The credit bureaus then have a 30-day period in which they are able to either verify the accuracy of those negative items and update the information or remove those negative items and update the consumer?s credit reports. If items are updated, they will remain on the consumer?s credit reports, at which point, the credit repair service organization would then re-dispute the item.

Credit Repair Services Organizations Fees Explained

Credit repair service organizations charge in 3 different ways.

  1. Pay-Per-Delete.?Credit repair service organizations have adopted this method because ?the CROA makes it illegal for a credit repair company to charge in advance of services being rendered so charging the client after an item has been successfully removed is a great way to comply with that provision of the statute.? (Mike Citron) With this method, a credit repair service organization would charge for each item that has been removed from the consumer?s credit reports.

For example, let?s assume a consumer is working on 50 negative items and the per item fee charged by the credit repair service organization is $25. Once the results come back if 10 out of 50 negative items are removed, the consumer would pay $25 x 10 = $250.

This method can be cheap or extremely costly. Meaning that in the example above, if all the negative items were removed, the consumer would then owe $25 x 50 – $1250.

  1. Flat Fee.?Through this method, the consumer would pay one flat fee that has been determined by the credit repair service organization after an analysis has been completed. This is tricky for a company because if they charge without completing a service first (for example, generating disputes for the consumer to send out to the credit bureaus) then they could be non-compliant with the law.
  1. Subscription.?This method varies drastically in price, yet in essence it can save the consumer if the credit repair service organization is effective. Charges typically can range anywhere from $29 to $150 per month. Once the consumer has initiated the work with the company, every 30 days they will be charged, whether or not negative items are removed. With this method, the credit repair service organization will continuously dispute negative items until all the negative items are removed.

How Effective Is Credit Repair?

Credit repair can be very effective if done right. There?s a lot of credit repair companies in the industry that claim to know what they?re doing, but ultimately you have to look at a number of different factors: history, reviews, licensing, bonding, scam reports, etc. Finding the right company requires research and diligence and if you don?t feel confident in a credit repair service organization, you can always complete your own credit repair. On an annual basis there are millions of negative items disputed by consumers through credit repair service organizations and the exact effectiveness cannot be determined. Yet effective companies will have some transparency with their removal rates. Check out some of the?best credit repair companies?that we’ve reviewed on our site. Important note: You can dispute your own negative items with all 3 credit bureaus. Make sure you dispute your items the right way; otherwise you might not be able to effectively dispute those items again.

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