What Are the Benefits of Using Credit Repair Companies?

The Federal Trade Commission advises consumers to avoid paying for credit repair, but this does not mean a credit repair company cannot save you time and money. While it is true you can repair your credit on your own, this is not always the best use of your time. If you do go with a credit repair company, watch out for potentially illegal practices.

Identification

Credit repair companies do not have any secret knowledge that lets them erase anything. The only benefit they can offer you is saving time. The typical dispute process, such as reviewing a credit report and mailing in a dispute letter, takes four hours on average, according to Bankrate. Letterhead from a credit repair company can also give your dispute an added aura of professionalism.

Considerations

Some credit repair companies can help you automate payments to creditors and even negotiate on outstanding accounts. This might even include the deletion of a bad account. You can do these services yourself, but a credit repair company may help if you feel timid about dealing with a creditor or not confident in your ability to negotiate.

Illegal Tactics

Take caution when you consider doing business with a company that guarantees the removal of any bad item or a completely new credit identity -- these are both signs of a scam. In the case of a new identity, it is illegal for the company to provide and for you to use one. Companies that offer these services commonly use illegal tactics including stealing Social Security numbers from good borrowers that recently died or providing you a taxpayer identification number in lieu of a Social Security number

Tip

Before giving any money to a credit repair clinic, get it to list what services they offer. Compare this to the $30 you would spend on credit reports from all three major bureaus and the value of your time. Check for any complaints about the company with the Better Business Bureau. Also, do not assume that a nonprofit credit repair company is legit. Some for-profit companies set up as a nonprofit to skirt state laws on credit repair clinics.