Don’t Throw Money Away on Credit Repair. Here’s How to Get A High Score on Your Own

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Credit repair companies can be expensive and ineffective. Find out how you can do a better job without spending a dime. [[{“value”:”

Having bad credit sucks. It makes it harder — and more expensive — to borrow money. It can also stop you from qualifying for the best cash back credit cards. More than that, it can impact your ability to score an apartment, set up utilities, and sometimes even get a job.

What sucks more than bad credit is that some companies prey on your desire to fix it. They promise they’re able to work some kind of credit magic. But in truth, they’re charging you for something you can do yourself. In fact, you can often do it better.

Here’s why credit repair companies are a waste of money — and what you can do to improve your score on your own.

How to fix your credit

If you’ve fallen behind with payments or struggled with debt in the past, there are no quick fixes for your credit. Getting a higher score is about building a bank of positive information. You can do that by paying bills on time and keeping your credit card balances under control.

Each time you apply for a new credit card or loan, the issuer will do a hard credit check, which dings your score slightly. Make that application count.

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Here are four steps you can take to repair your credit for yourself.

1. Get a copy of your credit reports

Credit bureaus calculate your score based information in your credit report. There are three consumer credit bureaus (Equifax, Experian, and TransUnion), and each holds slightly different data. If your score isn’t where you want it to be, head to annualcreditreport.com to request free copies of your report from each bureau.

2. Check your report for errors and report any you find

You’d be surprised at how many mistakes there are on credit reports. Almost 45% of respondents in a Consumer Reports study found at least one error.

Look for problems like:

Accounts you didn’t openErrors with credit limits or balancesAccounts that are listed as open that should be closed, or vice versaInaccurate information about missed payments

Any errors you find could be impacting your score. Report them to the relevant agency so you can get the information updated. The Consumer Finance Protection Bureau has a step-by-step guide on how to do it, including a template letter.

3. Pay down any outstanding balances

Here’s the tricky bit. If you’re struggling to manage your debt right now, paying it down needs to take priority. A bill that’s more than 30 days overdue will have a big impact on your score. And the later it is, the bigger the impact will be.

Review your spending and look for any non-essential costs you can cut. It doesn’t have to be forever — just until you get back on top of your bills. If you’re carrying a balance on your credit cards, consider a debt consolidation loan or balance transfer credit card to lower your interest rate and simplify payments.

4. Pay bills on time

As you’re building your score, make sure you understand each factor that’s used to calculate it. One big one is your payment history. If you sometimes forget to cover a bill, try setting up autopay.

Another important aspect is your credit utilization ratio. This is the amount of your available credit that you’re using. It’s recommended to keep this number below 30%, so if your credit card limits add up to $10,000, try not to use more than $3,000.

Don’t waste money on credit repair companies

Credit repair companies can charge as much as $149 per month. That’s a lot of money when all they do is follow the steps listed above. Particularly as you can do a better job of, say, challenging any credit report inaccuracies yourself.

Indeed, credit bureaus often ignore mass-produced letters that come from repair agencies. That’s because the Fair Credit Reporting Act gives you — not a credit repair agency — the right to challenge any incorrect information. But, as Schlanger Law Group points out, those disputes are supposed to come directly from the consumer, not an agency.

Some companies step over the line into fraudulent and illegal activity. For starters, they’re not allowed to demand upfront fees. More importantly, no company can erase accurate information from your report, no matter how much you want to get rid of it. If someone is promising this, it’s a scam.

Less scrupulous companies will challenge anything negative on your credit reports — even if the information is correct. The information will be removed while it’s being disputed, which can temporarily increase your score. But if it’s accurate, it will come back to haunt you in a few months. Only time can remove suboptimal information from your report — not a credit repair company.

You can take control of your credit

You might be nervous about repairing your credit alone. But if you’re already struggling with debt, credit repair services are using up money you could be using to pay it down. Even if you have cash to spare, this is one situation where you can do a better job than the so-called experts.

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