Do credit repair services really work?

We all know the value of having a strong credit score. It can help you to secure lower interest rates and opens up more options for you when you are looking to borrow money. Lenders will look at your credit record when assessing you for anything from same day loans, to overdrafts and mortgages.

It’s no surprise, then, that some businesses have started to offer so-called credit repair services, which claim to help customers to improve their credit score through a process of identifying and challenging errors and inaccuracies on their credit reports.

These credit repair businesses can help some consumers, especially those with obvious errors on their reports and very little time to spend disputing these themselves. However, credit repair services can’t always improve your credit score. They also usually charge for actions you can take yourself, for free.

Let’s take a closer look at credit repair services and whether they are worth the money. 

Why is your credit record important?

Your credit record is an assessment of your creditworthiness. Creditors, such as credit card companies, mortgage providers and online loan companies, use your credit report to assess the level of risk involved with lending you money. A better report with a higher score can open up more options for you and can also help to bring down the cost of borrowing, as lower interest rates are often offered to those with better credit records. 

So credit scores are important when you’re applying for credit. If you’re trying to buy a house or a car, or even simply sign up for a mobile phone contract, you’ll be relying on your credit score to get you a good deal.

Your credit record is put together by the three main credit bureaus, who collect information from a variety of sources to create your credit report. 

What are credit repair services?

Credit repair services are offered by businesses that will identify and dispute inaccurate and erroneous information on your credit report. They do this by obtaining copies of your credit report from the main credit agencies and spotting any details that may not be easy to prove, are outdated or are inaccurate. The credit repair companies then dispute these with creditors and with the credit agencies and seek to have the information removed from your report, which can have a positive impact on your credit score.

How much do credit repair services cost?

Credit repair companies tend to charge by the month and several months can pass before you find out whether they have been successful in increasing your credit score. Some credit repair companies offer a flat fee for every service, while others charge different amounts depending on the number of services you want to use. 

Whichever option you take, you could end up paying a credit repair firm hundreds of pounds and there is still no guarantee that your credit score will improve at the end of the process. 

Are credit repair services legitimate?

One of the issues that some people have with credit repair services is that they are not offering any services that are not already available for free, providing you’re willing to do the legwork yourself. In other words, you can dispute inaccuracies and ask them to be removed at any time, for free. However, it will take a bit of patience and effort on your part.

Credit repair services are legitimate but there is no evidence yet as to whether they tend to work for most people or not. The industry can sometimes use aggressive marketing techniques and anyone considering paying out for credit repair services should think carefully about whether they are likely to have unprovable, inaccurate or erroneous information on their credit report and whether they are prepared to pay out for the possibility of an improvement to their credit score.

How to repair a bad credit record

In addition to taking the steps that credit repair service providers take, there are other things you can do that may have an even larger impact on your credit score. It might be wise to take the below steps before considering paying out for a credit repair service.

Electoral register

You’ll be surprised what impact your electoral register status can have on your credit score. If you’re unsure whether you’re on the Electoral Roll, you can check through the Electoral Commission website

Once you are on the register, creditors and credit agencies can reliably check that you are who you say you are and that your address is valid. Without this line of verification, there’s always the risk that your identity is fake, making you a much riskier bet for lenders.

Low credit utilisation

This means that, if you have access to a line of credit, such as a credit card or a basic overdraft, using less than 30% of the credit available to you, reflects well on your credit record. Therefore, opting to have an overdraft facility when offered could be a good option, even if you don’t need one.

Keeping a close eye on your credit report

It’s now really easy to view your credit report with the various agencies, without paying for the privilege. You usually just have to sign up and you’ll get access to your score whenever you need it.

Taking the time to check your report thoroughly and regularly will maximise your chances of spotting any irregularities that may need to be corrected or disputed. The quicker you can do this, the less time it will reflect badly on your report.

Pay on time, every time

The most important thing you can do to protect your credit record is to make sure you do no more damage. This means making every effort to repay on time over a significant period of time. Credit agencies are looking for evidence that you can responsibly handle debt and this simple rule is the most important. 

Quick look – free quick and easy steps to improve your credit rating

  • Register to vote
  • Sign up to view your credit record
  • Report any errors on your file
  • Pay existing debt off on time
  • Aim for low credit utilisation

To sum up, are credit repair services worth it?

There are circumstances where using the services of a credit repair company could be helpful. For example, if there are clear discrepancies or inaccuracies on your report and you would prefer to offload the job of getting them removed. Being able to afford the cost, potentially amounting to several hundred pounds, is also a factor. 

However, in the vast majority of situations, you would be better off just keeping a close eye on your credit report and immediately reporting anything you feel is wrong or questionable, to the credit agency responsible for the report. This is free and, providing you keep on top of the discrepancies, might not even be a long-winded process. 

If you are looking to become more financially responsible and improve your credit rating, paying out for unnecessary services isn’t a great place to start.

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Warning: Late repayments can cause you serious money problems. For help, go to moneyhelper.org.uk