Credit Repair: How to “Fix” Your Credit Yourself

What Is the Credit Repair Organizations Act?

Credit repair companies dispute negative information found on your credit reports. But in the past, some of these companies would overstate what they could do for consumers to drum up business.

The Credit Repair Organizations Act (CROA) is a federal law that became effective on April 1, 1997, in response to a number of consumers who had suffered from credit repair scams. In effect, the law ensures that credit repair service companies:

• Are prohibited from taking any payment from a consumer until they fully complete the services they promise.
• Are required to provide consumers with a written contract stating all the services to be provided as well as the terms and conditions of payment. Under the law, consumers have three days to withdraw from the contract.
• Are forbidden to ask or suggest that you mislead credit reporting companies about your credit accounts or alter your identity to change your credit history.
• Cannot knowingly make deceptive or false claims concerning the services they are capable of offering.
• Cannot ask you to sign anything that states that you are forfeiting your rights under the CROA. Any waiver that you sign cannot be enforced.

The CROA adds transparency and due diligence to the credit repair process, making it less likely that consumers will be taken advantage of. However, regulators have still found wrongdoing among credit repair companies.

The Consumer Financial Protection Bureau has sued several credit repair companies over the years for requesting prohibited upfront fees, misleading customers about their ability to fix credit and more.

Can You Pay to Have Your Credit Fixed?

If your credit file has information you feel is incorrect, credit repair companies may offer to dispute the information with the credit reporting agencies on your behalf. Credit repair companies typically charge a monthly fee for work performed in the previous month or a flat fee for each item they get removed from your reports. However, Experian does not charge consumers or require any special form to dispute information, so this is something you can do on your own at no cost.

If you're on a monthly subscription, the cost is typically around $75 per month but can vary by company. The same goes for paying a fee for each deletion, but that option typically runs $50 each or more.

That said, it's important to keep in mind that credit repair isn't a cure-all—and in many cases it crosses the line into unethical or even illegal measures by attempting to remove information that's been accurately reported to the credit bureaus. While these companies may try to dispute every piece of negative information on your reports, it's unlikely that information reported accurately by your lenders will be removed.

And again, credit repair companies can't do anything that you can't do on your own for free. As a result, it's a good idea to consider working to fix your credit first before you pay for a credit repair service to do it for you.

How to "Fix" Your Credit by Yourself

There is no quick fix for your credit. Information that is negative but accurate (such as missed payments, charge-offs or collection accounts) will remain on your credit report for seven to 10 years. However, there are steps you can take to start building a more positive credit history and improve your credit scores over time.

How Long Does It Take to Rebuild Credit?

It's hard to say with certainty how long it takes to rebuild credit because each person's credit history is different. If you've had credit difficulties in the past, how long it will take to rebound depends in part on the severity of the negative information in your credit report and how long ago it occurred. While some actions can have an almost immediate effect—such as paying down credit card balances—others may take months to make a significant positive impact.

If you're disputing information in your credit report you believe is fraudulent or inaccurate, the investigation can take up to 30 days. If the credit reporting agency finds your dispute valid, the information will be removed from your credit report, and your score will reflect that change as soon as it's calculated again.

If you're making payments or reducing your credit card balances, don't worry if your credit report isn't updated right away. Creditors only report to Experian and other credit reporting agencies on a periodic basis, usually monthly. It can take up to 30 days or more for your account statuses to be updated, depending on when in the month your creditor or lender reports their updates.

It's critical that you check your credit score regularly to keep track of your progress and make sure the right information is being reported over time. As you build a positive credit history, over time, your credit scores will likely improve, and you'll have a better chance of qualifying for favorable credit terms when you need to borrow again.

How to Get Extra Help With Your Credit and Debt

If your debt is manageable, consider consolidating it via a personal loan or balance transfer credit card.

In some cases, debt consolidation loans can provide lower interest rates and reduced monthly payments, as long as you qualify and stick to the program terms. With a balance transfer card, you can typically get an introductory 0% APR promotion, during which you can pay down the balance interest-free. Just be mindful not to continue charging on the original card once the balance is transferred.

If your debt feels overwhelming and your credit isn't good enough to get a balance transfer card or a low-interest personal loan, it may be valuable to seek out the services of a reputable credit counseling agency. Many are nonprofit, and you can typically get a consultation with personalized advice for your situation at no cost.

You can review more information on selecting the right reputable credit counselor for you from the National Foundation for Credit Counseling.

Credit counselors can also help you develop a debt management plan (DMP) with unsecured debt like credit cards. With this arrangement, you'll make your monthly debt payments to the credit counseling agency, and it will disburse the funds to your creditors. The agency may also be able to negotiate lower monthly payments and interest rates.

If the credit counselor negotiates settled amounts that mean you pay less to your creditors than was originally owed, your credit score could take a hit. In addition, your credit report may denote that accounts are paid through a DMP and were not paid as originally agreed, which may be viewed negatively by lenders. However, using a DMP may not negatively impact your credit history when you continue to make payments on time as agreed under the new terms.

Keep Track of Your Credit After You've Reached Your Goal

Once you've done the work to rebuild your credit history, you may be tempted to move on and focus on something else. While you likely won't need to focus as much on your credit score as you used to, it's still a good idea to keep an eye on it.

Monitoring your credit will help you spot any potential issues that could cause your credit score to drop again. It'll also give you a heads up if someone commits identity theft, so you can address it before it gets out of hand.

With Experian's free credit monitoring tool, you'll get access to your FICO^® Score^☉ powered by Experian data and also an updated copy of your Experian credit report. You'll also get real-time alerts about new inquiries and accounts, suspicious activity and changes to your personal information.