by Eli McCormick
March 19, 2014
The top performers in our review are Lexington Law. the Gold Award winner; Sky Blue Credit Repair. the Silver Award winner; and MyCreditGroup. the Bronze Award winner. Here’s more on choosing a system to meet your needs, along with detail on how we arrived at our ranking of 10 systems.
Credit repair services are designed to help you analyze your credit report and suggest a good plan of action to help you dispute and remove negative items. Most of these services will assign an account manager to work with you and will help protect your identity as part of their monthly subscription price. Credit repair service companies admit that you can handle repairing your credit on your own. In fact, most reputable companies will include educational materials online to help you through process without paying for the service. However, the top three services we reviewed will make the extra effort to write letters, fill out applications and file documents on your behalf.
Credit repair services charge in two different way. Firstly, they charge you for the initial work that generally includes an analysis of your credit history and provide ideas of how you can improve your FICO score. For more in-depth help, including help with disputes, the removal of negative items and payoff resolutions, you may need to pay the monthly subscription fee since it generally takes a minimum of 60 days to start seeing results. None of the services we reviewed lock you into an annual agreement. This means once you have reached your desired credit goals, you can cancel the service and no longer pay the subscription fee.
It is important to be very cautious when trusting someone with your personal information, especially when it comes to credit. If you decided to have the work of repairing your credit done for you, be prepared to provide your social security number, credit card numbers, bank information, address, phone numbers and employment. Many credit repair agencies look legitimate but are actually scammers in disguise.
The federal Credit Repair Organizations Act of 1996 allows the Federal Trade Commission to set rules for credit reporting and other financial services in order to crack down on fraudulent companies and practices. The Act specifically requires five practices of credit repair agencies. These are:
- Provide a written statement of your consumer rights regarding your credit
- Accurately represent what services they can and cannot provide
- Not collect payment until all promised work is done
- Provide a written contract
- Allow you to cancel the contract within three business days after signing; however, this must be done in writing
It is also against the law for these services to require you to sign these rights away. This means if a clause within your contract allows a service to violate any of the above requirements, you will not be held accountable to them in court.
Regulation of Credit Companies
One thing we looked for while reviewing credit repair companies is if they are licensed or registered with their state's attorney general office. Since there isn't a federal registration requirement, individual states often take it upon themselves to regulate this industry to help protect consumers from fraud. Most require additional regulations in addition to those under the Credit Repair Organizations Act.
Most of the companies we reviewed are registered with a state attorney general office or other state agency that oversees consumer protection. 180 Credit Solutions is one company that is registered through the Texas Secretary of State rather than the attorney general office since this is where consumer protection is regulated within Texas.
Florida is one state doesn't regulate the credit industry, including credit reporting and credit counseling services. This was verified with the Florida State Attorney General's Office of Citizen Services, the agency that oversees consumer protection. We also spoke with the Department of Finance Services that oversee debt consolidation companies in Florida, but they, too, do not regulate credit repair business.
The Credit People is the only service on our lineup that is located in Florida.
However, just because a company is licensed or registered with its state doesn't automatically make it a legitimate organization. It is very easy, in most cases, to be registered. Most of the state websites we looked at usually require a simple form and a yearly fee in order to
be registered with the state and receive a license.
Most of the services on our review are also bonded. This means they are insured by a surety company to cover costs in the case they are sued or grossly negligent in their services. As with registering, bonding doesn't always equate to being legitimate, but it does add an extra layer of protection if you choose to have a credit repair company do the leg work for you.
What We Tested; What We Found
One important service we looked for while reviewing credit repair services is whether or not you are provided with an in-depth analysis of your credit report. All of the services will give you a summary, which includes your score, list of delinquencies and other negative items. They will each help you, either through educational materials or from an account manager, to dispute those items that shouldn't be on your credit. However, an analysis will include which items to take off, the points your score will increase as a result and other steps to take in order to further improve your overall credit ranking. These steps can include which credit card to pay off first, whether you should open a checking or savings account, or how revolving credit may help your score.
Most credit repair companies stop after the initial analysis of your report. However, MyCreditGroup will also help you create a payoff schedule to help you get current on your delinquent accounts or pay off loan debt more quickly. MSI Credit Solutions is the only other service on our review that offers payoff resolution, but only for an additional fee rather than part of your monthly subscription fee.
It is important to be able to connect with your account manager when you need him or her. This is why we looked at the type of support available to credit repair service customers. Both email and telephone support is important. However, be careful when sending correspondence through email, particularly when it includes sensitive information since it is difficult for a service representative to verify your identity via email. This means some conversations can only happen over the phone and only after the representative can verify your identity.
Credit Repair Support Services
Before you attempt to fix your credit score, it is important to first take an accurate look at your credit report. We have reviewed the best credit reporting agencies that can help you obtain your free copy of your credit report and then continue monitoring your credit for any suspicious activity. Often these solutions will offer some basic help with disputing negative items and identity theft monitoring.
Once you have your analysis from a credit repair company, you can look at hiring a firm to help you eliminate your bills. We have a list of debt consolidation companies, though you will still need to ensure that you take precautions since you will have to provide sensitive information. It is also important to note that often these companies will negotiate with your creditors to pay less than what is owed. While this may bring some relief, negotiated payoffs may be reported negatively to your credit report.
If you find that you would rather do your own credit repair, you can consider contacting a credit counseling service. These companies typically don't offer to do the work for you but will offer the support, counseling and knowledge you need in order to do it yourself. Additionally, we have some good articles on credit repair and a guide to DIY credit repair for a variety of situations, including after a bankruptcy, identity theft or divorce.
Our Verdict & Recommendations
While there is some value to using a credit repair service, you have to be careful since it is difficult to determine whether or not a company is legitimate. Even those that are licensed or bonded may still use some sketchy practices. This is especially important to be aware of since these services require you to divulge personal information, including social security numbers, date of birth and addresses.
All of the work these services offer you can do on your own. We have many references and sources to help you and will not require you to pay anything to use them. If you do decide to use a credit repair company, consider looking into our top picks, Lexington Law, Sky Blue Credit Repair and MyCreditGroup.