Do Credit Repair Companies Really Work?

There are a number of credit repair companies offering their services on the web these days; each claiming to be able to fix your credit problems in short order. The question is: do any of these services actually work?

The short answer is either no, or not for long. In order to justify this statement however, we have to gain an understanding of how these operations work to begin with.

How Do Credit Repair Services Work?

There are a couple of ways that these companies operate in an effort to improve your credit for a fee. The primary credit repair method is to get you listed as a secondary card holder on someone else's credit card who has good credit. This gives you better credit by proxy, as you are now directly associated with this person's good score because you are listed as a secondary card holder.

In fact, of course, you are never given actual access to this person's credit (who would be crazy enough to do this?!); you just get the anonymous benefit of being associated with their card. Companies pay big bucks (typically around $250 per additional card holder) for people to in effect lend you their good credit ratings.

These companies of course charge you much more than that... which would be fine if it worked right? The problem is that very soon it won't. Credit bureaus have become wise to this scam and as of 2008, will no longer gain any benefit on your credit score by being listed on anyone else's card.

This is really unfortunate, as many young people get their first credit histories by being listed as supplementary card holders on their parents' accounts. Now they are going to have to build their histories from scratch without this once legitimate starter benefit — all because of these credit repair scam artists trying to make a quick buck off your unfortunate credit score.

The next most common way for these companies to attempt to fix bad credit (for a price of course) is to simply dispute all of the negative claims on your credit report. If the lender doesn't respond within 30 days, these claims are removed. Of course, if the lender responds, you are no further ahead (and out some cash). Then again if on day 31, the lender decides that you still owe them money, they'll just make the negative claim again, and there you are, back at square one.

There are a few other scams that credit repair companies will urge you to pull -- and some might even work temporarily; however, many of them are felonies which clearly you don't want to have to deal with in addition to a bad credit report!

I think the former director of the Federal Trade Commission's (FTC) Bureau of Consumer Protection, Jodie Bernstein had to say on the topic speaks volumes: "While there are legitimate, not-for-profit credit counseling services, the FTC has never seen a legitimate credit repair company."

Are There Any Credit Repair Services That Work?

Besides companies that deal in bankruptcy and credit consolidation (i.e. creating a plan to deal with your creditors as a block) the only legitimate credit repair strategies are described on this site. Check out the Credit Article Index for a comprehensive list of articles on how to repair your credit.

Stay On Top Of Your Credit!

The only way to ensure your credit score is accurate (some estimates indicate that upwards of 60% of credit reports contain serious errors!), that your identity is secure and that your FICO score is heading in the right direction (up!), is to monitor your credit file regularly. Equifax provides the best service bar none in this area and gives you your actual FICO score (not true at Transunion and others!) as well as strategies to improve your score that are tailored to your exact situation.