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 |  | Startup Fee: $19-$150 |  | Monthly Fee: $37-$100 |
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There are many companies and nonprofit organizations to help consumers repair bad credit, manage debt and provide debt counseling with the aim of improving credit scores. This can help consumers save money, get out of debt and improve their financial habits.
Typical costs: | - Credit repair companies typically charge a monthly fee of $37-$100 to administer their program. The cost varies depending on the complexity of the individual's credit, such as the number of accounts they hold, as well as the number of services provided. For example, Lexington Law[1] offers "advanced packages" that cost $79.95 and $99.95 in addition to its basic $59.95 credit report repair. The advanced packages include creditor interventions, debt validation and monthly credit score analysis in addition to its essential, $59.95 credit report repair service. These additional services involve more, and more complex, interactions with creditors and with the consumer.
- Many credit repair companies also charge a startup fee, which typically costs $19-$150. This charge includes the administrative costs for starting the process, including requesting credit reports from the three bureaus.
- Many reputable nonprofit debt-counseling companies, such as the Consumer Credit Counseling Service group of nonprofits, are sponsored by the government, but do charge fees. They will, however, reduce or waive fees if the client is able to prove financial hardship. For example, the CCCS of Mobile, AL[2] does not refuse any clients for inability to pay fees.
- Do-it-yourself credit repair and debt management is free, but could take considerable time and consistent efforts. Credit repair is a service that provides convenience and ease. The consumer would have to write letters requesting credit reports from each of the three credit bureaus (TransUnion, Experian and Equifax); scan these reports for incorrect or outdated data; and then send letters disputing the incorrect data to the bureau. Often, consumers must follow up with the credit bureaus to be sure their information has been changed. However, the Federal Trade Commission provides detailed information[3] on how to go about repairing one's credit.
Related articles: Personal Bankruptcy, Credit Report, Financial Planner
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What should be included: | - Basic credit repair involves the credit repair company looking over a credit report for erroneous or outdated data and then disputing any incorrect information. These credit repair companies charge the same monthly fees and target their services toward consumers looking to improve their credit in a given timeframe to prepare for upcoming life events, such as buying a new car or house.
- Credit counseling is a required step in the personal bankruptcy process.
- Debt counseling includes one-on-one help with household budgeting and developing a financial strategy that targets certain bills to pay off first. Debt counseling may include debt settlement, in which the counselor negotiates with lenders to reduce the amount owed, or debt management, in which the counselor negotiates with lenders to reduce the amount of interest charged.
- Many companies offer debt management plans, or DMPs. These companies have established relationships with creditors (such as credit card companies) to create discounted payoff plans. Under these payment plans, the client pays a monthly sum to the debt counseling company, and the company uses the money to make payments on all of the client's outstanding debts. Debt management plans typically cost $50 to set up and $40-$60 per month to administer.
Discounts: | - Some companies, like credit-team.com[4] , offer discounts of about 20% for military personnel.
- Some companies, such as CreditReportRepair.net[5] offer couples discounts, or discounts for a spouse who is also using credit repair services.
Shopping for credit repair and debt counseling: | - Though recent laws passed that aimed to stop credit repair and counseling fraud, it's important to be aware of your rights. Many states have specific laws regulating this industry, such as limiting how much credit counseling companies can charge. The Federal Trade Commission, the federal agency that enforces these companies, offers a list of ways to recognize a credit repair scam[6] .
- Consumer Reports[7] advises finding a nonprofit program that charges "an enrollment fee of no more than $25 and a monthly fee of no more than $50."
- Because this process could take as long as five years to run its course, it's important to find a reputable agency. Reputable credit repair and counseling services will be associated with one of these agencies: the National Foundation for Credit Counseling[8] , the Association of Independent Consumer Credit Counseling Agencies[9] or the International Association of Professional Debt Arbitrators[10] . Each of their websites offers helpful tools, such as calculators and budget worksheets.
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External Resources: | - www.lexingtonlaw.com/faq/costs/
- www.lifelinesmobile.org/services_credit.php
- www.consumer.ftc.gov/articles/0058-credit-repair-how-help-yourself
- www.credit-team.com/how-we-work.html
- www.creditreportrepair.net/credit_repair_costs.html
- www.consumer.ftc.gov/articles/0058-credit-repair-how-help-yourself
- www.consumerreports.org/cro/money/credit-loan/negotiating-with-your-creditors/overview/...
- www.nfcc.org
- www.aiccca.org
- www.iapda.org
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