Credit Repair Alternatives: 4 Other Paths to a Better Score

While credit repair can be a way to improve credit, the process of working with a credit repair company isn’t for everyone – and it’s not your only option. Consider the alternatives to see if one is better suited to repair your credit and expand your access to financial products.

Do it yourself

The do-it-yourself approach to credit repair requires you to do the hard work associated with restoring your credit health. It’s true that a credit repair company likely has experience with cases like yours. Still, it can’t do anything you can’t do on your own.

In fact, repairing your own credit costs a fraction of the price – probably no money at all. That said, you have to do some legwork. You will obtain copies of your credit report and study it, file disputes for any errors found and wait for the results.

Although it may feel intimidating, do-it-yourself credit repair will help you avoid additional monthly fees and, ideally, better understand your credit status.

Plus points

• Can help you avoid extra costs.
• Step-by-step guidance is available.
• It can be a strength to tackle it yourself.

Cons

• It takes more time than hiring someone.
• Communicating with credit bureaus can be challenging.
• Resolving disputes must be done in a very specific way.

Improve your payment history

Your payment history accounts for 35 percent of your total credit score; this is the biggest factor. So if your credit score is on the low side, improving your payment history can provide a significant boost.

Your payment history includes all credit-related products, such as credit cards, mortgages, car loans and personal loans.

To do this, you must pay your bills on time, keep your delinquent accounts current, and communicate with your lenders if you could miss a payment to make arrangements. It’s also wise to enable automatic payments to avoid any late fees.

Plus points

• Can create a better monthly payment routine to ensure you don’t fall behind.
• Will reduce or eliminate late fees.
• No outside company fees other than refunding missed bills.

Cons

• Can be a long process.
• It takes time for your score to see improvement.
• No additional expert support.

Consider debt consolidation

Debt consolidation is a process of combining multiple accounts into one to streamline repayment. One way to do this is through a debt consolidation loan.

Using this type of loan to consolidate revolving debt, such as credit cards, can lower your credit utilization ratio. Credit utilization accounts for 30 percent of your FICO score.

This works because your debt no longer counts toward your revolving credit limits. You’ll get the best results if you leave your old, paid-off credit accounts open.

Consolidating debts can also make it easier to stay on top of repayment because you only have to worry about one due date.

You can also save money in the long run because these loans typically have lower interest rates than most credit cards. You want a credit score of 670 or higher to have a better chance of getting a competitive rate. But even with a lower score, you can find better rates than your existing rates. You can pre-qualify to find out.

Plus points

• Can streamline repayment, making it easier to pay on time.
• Can make debt more manageable by lowering your overall interest rate.
• Can accelerate debt repayment by using a fixed schedule.

Cons

• Good to excellent credit required to guarantee the lowest rates.
• Some lenders may charge origination fees.
• Can lead to increased debt burden if bad financial habits are not addressed.

Work with a credit counselor

If a traditional credit repair company isn’t the right option for you, a credit counselor may be a viable alternative. With this approach, a professional can still do most of the legwork for you. But you also benefit from more attentive guidance, which can be offered by nonprofits, often at no or minimal cost.

You’ll work with a trained professional who will examine your current spending habits, debt levels, and credit reports. Based on their analysis of your financial health, you will receive a tailor-made action plan to address your financial problems. One approach here can be a debt management plan (DMP), which aims to make your unsecured debt balances more manageable so you can pay them off sooner.

Plus points

• Advice specifically tailored to your financial situation.
• Potential to address and resolve consistent financial missteps.
• The confidential counselor can help with creditor negotiations.

Cons

• Some companies require a monthly payment for service.
• If your debts are more or less under control, it may not help.

When Should You Consider a Credit Repair Company?

Credit repair companies work to improve your credit for a fee. They look for inaccuracies in your credit report and file disputes with the credit bureaus.

These issues can include closed accounts that appear to be open, incorrect account balances, and accounts that don’t belong to you. Although you can do this yourself for free, it can be time-consuming.

Hiring a credit repair company may be a good idea if:

• You have been diligent with your payments and your credit has not improved.
• You would rather have a professional handle it and be able to pay the costs.

It’s also worth noting that credit repair companies can only fix actual mistakes. For example, imagine that a history of late payments drags down your score. If there is evidence that these payments were actually made late, the credit repair company cannot dispute them.

Make sure you understand what credit repair companies can and cannot repair before signing up for this service.

it comes down to

If you find yourself in need of credit repair, you are not alone. But if working with a credit repair company feels intimidating or doesn’t quite fit your needs, there are other options.

Consider a do-it-yourself approach, focusing on improving your payment history, consolidating debt, or working with a credit counselor to improve your credit profile and overall financial health so you can reach your credit score goals.