If you have bad credit, you’re not alone. Studies show that 56% of Americans have bad credit; the Federal Trade Commission discovered that one in four people have had an error on their credit report that’s negatively affecting their score. One way you can improve your credit is by using a credit repair company, but these services aren't cheap. Is it worth the money?
Pros of Credit Repair Companies
- Connections: When you hire a credit repair company, you're paying for potential knowledge and connections that can help resolve issues with your credit history. If you choose a credit repair company that uses the assistance of an attorney, you can quickly move onto improving your credit through court.
- Budget Help: One of the biggest issues when it comes to credit is making a budget that will stick. If you’ve gotten into a cycle of bad credit due to an inadequate budget, then credit repair companies can help you plan one that fits your lifestyle. While it may be tough at first, these experts can improve your credit and spending habits.
- Free Assistance: Because bad credit is such a big issue, many organizations are willing to offer free help to those who need help. Paying for assistance may not be in your budget, so there are nonprofit agencies that are ready to give low-cost — and even free — help to those that are looking to repair their credit.
Cons of Credit Repair Companies
- Cost: Credit repair companies can vary significantly depending on the type of services you need. Most businesses charge a monthly fee of $37-$100 for their program, but the price can easily alter based on your credit. There are additional options available for those with severe issues with their credit history. Some law offices can charge $59.95-$99.95 monthly. In addition to this, some credit companies can charge a startup fee of $19-$150 depending on the business.
- Scams: The prevalence of bad credit is worsened by the number of scams that prey on individuals looking to repair their credit. These scams can include “pay-per-deletion” or even “new credit identity” services. It’s important to research a company before trusting them with your credit information — ensure that they are a reputable business before paying any money.
- Poor Advice: An inadequate budget can easily lead to a poor credit score if you can’t make payments or you rely on credit cards on a day to day basis. Many people seek budget assistance from credit repair companies, but not every company gives good advice. Credit is complicated, and it’s easy to get confused when it comes to repairing your history. Some credit repair companies may suggest that you consolidate your debt, but this can be a risky move as the interest and payments may be much higher than paying the original debts.