How Much Does Credit Repair Cost?

If you’ve ever applied for a credit card or a loan, you know that a less-than-stellar credit score can affect your interest rate and terms or even cause you to be denied altogether. But what if your score is lower due to an error on your credit report? You can try to fix it yourself, but this can be frustrating and time-consuming.

Fortunately, there are many credit repair companies that can do this legwork for you. But how much does that cost? Let’s take a look at what a credit repair service does and how much it costs.

What Is Credit Repair?

Whether you hire a service to do it or you handle the problem yourself, the act of credit repair is improving your credit score by removing or correcting inaccurate information on your credit report. This can be things such as a reported late or missing payment that you made on time, an account that was falsely opened in your name, accounts you thought were closed but remain open and other inaccuracies about you or your financial activities.  

A credit repair company is a third-party service that contacts the three major credit reporting bureaus, Experian™, TransUnion^® and Equifax^®, on your behalf. For a fee, the company works to remove inaccurate or negative information and help you improve your credit score over time.

While you have the legal right to challenge anything on your credit report yourself (and you should make a regular habit of reviewing your credit report for errors), many people find the process intimidating and prefer to hire a professional.

How Much Does It Cost To Repair Your Credit?

If you do hire a credit repair company, be prepared to pay at least several hundred dollars. How much you’ll pay depends on the company, what kinds of service they provide and the number of issues on your credit report. If you’ve foreclosed on a loan or a credit card, the mess is harder to clean up than a couple of missed payments on your electricity bill. If your credit issue is relatively minor, you might consider trying to clean up the problem yourself, despite the hassle and inconvenience. It could save you a bundle of money.

Credit repair can take months, and because of that most firms charge anywhere from $50 to $150 per month, often with an upfront fee of about $100 or less. Most companies offer a la carte pricing based on the bundle of their individual services you sign up for. You should read the fine print of the contract and select only the services required to fix your credit score. Some of the most common services credit repair companies provide include:

• Credit report analysis
• Credit bureau challenges and disputes 
• Creditor interventions, including prepared letters to challenge incorrect hard inquiries on your credit report
• Identity theft insurance
• Credit and debt counseling, including educational materials on debt management strategies
• Specific credit repair strategies for issues arising from divorce, student loan debt, medical expenses or identity theft

Keep in mind that most credit repair companies offer significant discounts for former or active military personnel and seniors.

Are Credit Repair Companies Worth It?

Bad or outdated information that sits on your credit report for years can cost you potentially thousands of dollars over time in the form of higher interest rates on loans or higher insurance premiums. If you’ve had a sticky financial setback in your past, such as a bankruptcy or foreclosure on a loan, and haven’t the time or patience to take the steps toward resolution, then perhaps the $1,000 or more payment to an outside credit repair company is worthwhile.

Credit repair services can be worth it in some scenarios. If you feel entirely overwhelmed by your credit issues and you know you need third-party help to get organized and figure out your next steps, reaching out for help may be worthwhile.

Just be aware that the credit repair industry is known for scams and bad actors. This is because people with bad credit just want their problem to go away and can fall for quick-fix schemes. First and foremost, no credit repair company can get information scrubbed from your credit report if that information is actually true. If they claim they can, stay away. Here are some other signs that a credit repair company might be deceitful or an outright scam:

• Holding back information: If the company doesn’t inform you of your legal rights to obtain a written contract with the company and to cancel that contract within 3 business days, this is a sign it’s not reputable.
• Asks for payment up front: Due to protections afforded under the Credit Repair Organizations Act, credit repair agencies can’t charge any fees until they’ve rendered services. 
• Asking you to misrepresent information: If a company asks you to lie or misrepresent anything about your identity or finances, don’t work with them.
• Failing to provide complete or accurate information in response to all your questions: If a company struggles to answer your questions or acts frustrated about your inquiries, you shouldn’t use them.

Before signing a contract with a credit repair company, do some research to make sure they’re reputable. Good signs include multiple positive reviews from customers, a positive and active social media presence with plenty of happy clients, good standing with the Better Business Bureau and community organizations, and a long track record of being in business.

How To Repair Your Credit For Free

Technically, anything a credit repair company can do for you, you can do yourself. Especially if the nicks to your credit report are relatively straightforward, you should try to fix the problems on your own first.

One key is to stay on top of your credit rating. Each year you’re entitled to one free credit report from each of the three major credit monitoring bureaus, Experian™, TransUnion^® and Equifax^®. If you notice any incorrect or missing information that could be impacting your credit score, each of these services provides a credit dispute letter template to open a formal review. This will start the process — what unfolds from your inquiry may take time and may or may not solve your issue, but you’ll be in charge and it’s free.

Aside from removing incorrect or damaging information from your credit report, there are various other ways to improve your credit score yourself. Here are some fundamentals of good financial discipline that will impress future lenders:

• Pay your bills and loan payments on time: Just as not paying these monthly obligations on time can harm your credit score, paying them on time over the course of months and years builds up your rating. Sometimes people just forget to pay, which is why setting up an automatic payment plan with a tool like the Rocket Money℠ app can be invaluable.
• Maintain a lower credit utilization ratio: This number reflects the money you owe on your credit cards and other lines of credit, divided by your total credit card limit. A good number to aim for is 30% or less. Having available credit indicates that you're only using the credit that you need, which may be a positive sign for lenders.
• Limit the number of credit checks: Every time you apply for a loan or credit card, the lender will check your credit report. This is called a “hard inquiry” and it is noted by the credit bureau. If you have too many of these in a short period of time, it might scare off lenders because it looks like you’re too eager to borrow.
• Keep the amount you owe down: If you have higher balances on existing lines of credit, such as multiple credit cards, it’s a sign to prospective lenders that you might not pay them back on time. Try to pay balances to zero every month if you can, but at least keep your balances low and pay the monthly minimum every time.
• Maintain a mix of accounts in good standing: Lenders not only like to see that you pay back your loans, they like to see that you have a variety of accounts, such as credit cards, car loans, student loans, a mortgage, etc. This shows that you’re an active and knowledgeable financial consumer. It even helps if you keep old accounts, which you don’t use anymore, open.

The Bottom Line

A healthy credit score will not only help you get an important loan when you need one, it can also save you thousands by ensuring you get the best possible rate and terms. To make sure that bad or inaccurate information doesn’t affect your credit score, you must check your credit report on a regular basis.

There are many credit repair companies that can help you clear damaging information from your report, but they can be expensive and possibly shady. It’s best to catch problems early and try to fix them yourself. Download the Rocket Money℠ app today for instant access to your real-time credit score, as well as a snapshot of your complete financial profile, at your fingertips.