Home > Credit 101 > Can You Really Repair Your Own Credit for Free?

Comments 4 Comments

You have probably heard the advice not to waste money on credit repair. You’ve been told there is nothing they can do that you can’t do on your own. But there you are staring at your credit report or your credit score and you have no clue what to do next. That’s when the idea of hiring someone to just take care of it starts sounding very attractive.

But before you shell out big bucks, you want to understand exactly what you are paying for. And you’ll want to weigh that against an investment of your time to work on your credit.

First, I’ll preface this by saying that I don’t object in theory to the idea of credit repair companies. I pay someone to do my taxes and I can see why someone who is overwhelmed (say after a divorce, or while running a small business) would want to get expert help with their credit.

But what I do object to is paying someone a lot of money for something that is basically a gamble — and a good amount of credit repair is just that, as I will describe in a moment.

How Credit Repair Works

There is one primary objective with credit repair: to raise your credit scores. For most people, accomplishing that means they need to get rid of negative information that is hurting their scores.

Credit repair companies largely try to accomplish this by challenging everything in the credit report that may be bringing down scores, whether it is accurate or not.

They do this by mailing letters to the credit reporting agencies, asking them to investigate the items they would like removed. By law if you ask the credit reporting agency to investigate an item, in most cases they must do so within 30 days. If the information is not confirmed by the source it must be removed.

That’s where the gamble comes in. The creditor or company furnishing the information may or may not respond to the dispute. If they don’t, it will no longer be reported — unless the creditor furnishes it again, and there are some rules they are supposed to follow before re-reporting this data.

There’s no magic trick to this process. It’s a matter of being organized and persistent. You don’t have to use any specific language in your credit report dispute letter. Referencing sections of the Fair Credit Reporting Act is not going to make the credit reporting agencies quake in their boots. They know what they are required to do.

You do have to make sure your letter is clear and that the person processing your request can understand what exactly you are asking them to look into and why.

Credit reporting agencies get thousands of these letters every single week. If you have a picture in your mind of someone reading your letter and picking up the phone or logging into a computer to check with the source to find out if the information is accurate, you’re mistaken. They do log your complaint into a computer, but from there it goes directly to the creditor, which then must process the dispute on their end. How effectively they do this has been a matter of debate (and some lawsuits), but it’s fair to say there is a great deal of automation in the process, which can work for or against you, depending on your situation.

The letters these firms send on your behalf are typically variations of form letters. The return address, the font, the layout and everything else about them are often the same and the agencies receive stacks and stacks of them every day to process.

I want to make sure you understand this point if you are thinking about hiring a credit repair company. If you are contemplating credit repair, ask them, “Exactly what do you do for me?” If they tell you that they will dispute information then ask them how they will do that. Drill down keep enough and you’ll probably find that they will send letters to the agencies requesting that negative information be verified. You may wind up paying someone hundreds, or thousands, of dollars just to send form letters for you.

If you want to pay for that, it’s your choice. But understand that you can just as easily write a letter yourself and send it (with proof of delivery of course) for just a few bucks.

Building Credit

Any credit repair firm worth its salt will also make sure you are building positive credit references. After all, getting the negative information off your reports is only half the battle. You can get a bankruptcy or tax lien removed, for example, and your score can actually drop. (That’s due to the complicated, behind-the-scenes way scoring models group consumers together and compare them to other consumers in their group, rather than with the entire universe of people with credit reports.)

To build strong credit, you need a positive payment history going forward. Any credit accounts you still have must be paid on time 100% of the time from here on out, and you may need to consider getting a secured credit card to help you rebuild credit.

One more task: If you have debt, part of your repairing your credit is paying down credit cards where your reported balances are greater than 20 – 25% of your credit limits. Paying down these debts can quickly have a positive impact on your scores.

That’s the basic jist of what credit repair involves. Of course every person’s individual situation can vary somewhat. You may need to figure out what to do about unpaid collection accounts, for example: pay them, settle them or let them sit until they are too old to be reported. Or you may have tax liens on your reports, which you may be able to get removed from your reports by requesting a withdrawal through the IRS Fresh Start Program. (Again, that’s something you can do for free yourself if you chose.)

However you decide to approach this, if you expect miracles, you may well be disappointed. If your credit has been wrecked after a divorce or bankruptcy, it’s not likely you are going to have a high credit score in a few months just because you are willing to pay big bucks for someone to fix it.

At the same time, if you are going to try to repair your credit yourself, you don’t have to reinvent the wheel. There are plenty of good resources that will help you develop and implement a strategy for building better credit.

Free DIY Credit Repair

Start by ordering your free annual credit reports from all three major credit reporting agencies. The data in your reports is used to calculate your credit scores, and you need to see what’s being reported so you can identify mistakes or things you need to work on.

Get a credit score. It will be helpful for understanding where you fit in. But a number alone isn’t that useful. (That’s why a credit score from say, your credit card company, may not be particularly helpful here unless if goes into detail about what is affecting your score.)

You can get a free credit score along with a breakdown of the factors affecting your score for free at Credit.com. You will also get a personalized action plan that will help you understand what steps you can take to build stronger credit and you will be able to track your progress over time.

You’ll also find a wealth of DIY credit repair tips that will explain various aspects of your credit reports and what you can do about them, including inquiries, judgments, medical bills, collection accounts, debt and more. You can ask specific questions about those topics in the article comments.

Several books can help you understand how credit reports and scores work, including The 90-Day Credit Challenge by Jeanne Kelly (a contributor to Credit.com), Your Credit Score: How to Improve the 3-Digit Number That Shapes Your Financial Future by Liz Weston, Credit Scores & Credit Reports by Evan Hendricks, You’re Nothing But a Number by John Ulzheimer and The ABCs of Getting Out of Debt: Turn Bad Debt into Good Debt and Bad Credit into Good Credit by Garrett Sutton. These books may also be available at your local library.

If you still aren’t sure what to do, Experian offers a one-on-one review of your credit reports. The Experian Credit Educator consultation costs $39.95. They aren’t going to recommend you dispute accurate but negative information, of course, but they will review your Experian credit report with you, answer your questions and offer specific steps for improving your credit.

Finally, if you decide to hire someone to fix your credit, make sure you understand what they offer, how much it will cost, and what kinds of guarantees they offer. By law, credit repair companies must give you this information in writing, along with a three-day right to cancel.

More on Credit Reports and Credit Scores:

Image: Purestock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Linda

    So getting your reports and paying off what’s owed helps? Then you build your credit buy making payments on time in full, so the what happens once you’ve paid off everything? Does the score change. Are the negative reports removed?

    • http://www.credit.com/ Credit.com Credit Experts

      Negatives such as late payments are typically removed seven years and 180 days after they are first reported. So they will (or should) eventually fall off. It’s fine to use credit, but best if you keep balances to under 30% of your credit limit (and under 10% is even better). If you have paid off everything and are no longer using credit, then your score will begin to drop, because that won’t produce data that can be used to gauge the likelihood that you will repay. When you get your reports, read them carefully and make sure the information is accurate. If it is not, dispute it. Here’s how:
      A Step-By-Step Guide to Disputing Credit Report Mistakes
      And here’s a guide to deciphering your credit report: Ultimate Credit Report Cheat Sheet

  • allan klaff

    I have several charge offs and applying for a VA mortgage loan. What can I do to build my score to 640 thank you

    • http://www.Credit.com/ Gerri Detweiler

      Unfortunately it’s impossible for me to say exactly what you personally need to go to raise your credit scores and how quickly you can do that. There are many factors that go into scores and scoring models vary.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.



Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team