Bad credit can affect nearly anyone over the course of a lifetime and for myriad reasons. Getting in over your head with credit card spending, being consistently late on debt payments, or facing bankruptcy or foreclosure all leave a negative mark on your credit file. Regardless of the cause of your less than perfect credit, there are resources available to help you get back on track.
Both credit counseling and credit repair are common methods to do just that, and there are instances where one is more appropriate than the other. Let’s take a closer look at consumer credit counseling companies versus credit repair companies so you can make an informed decision on what’s best for you.
Credit Counseling Explained
If you’ve gone to the almighty Internet for direction on how to fix your credit woes, it’s likely you’ve had a credit counseling company or two pop up in your search results. Credit counseling companies are typically not-for-profit organizations focused on helping consumers better understand their financial situation. This includes how past and future activities impact their financial lives.
Reputable credit counseling companies offer access to professionally trained counselors who work with you to get a handle on your current financial circumstances. They do so by reviewing your income, assets, and expenses. Counselors may also provide options based on the goals you have for the future, including financial resources like debt management plans or consolidation options.
Most credit counseling companies offer their services to consumers at little to no cost, making them a valuable resource when you’re not sure what your next financial move should be.
Understanding Credit Repair
Credit repair companies differ from credit counseling companies in that they are in the business of fixing bad credit in partnership with consumers. They are not necessarily providing actionable guidance on big picture financial situations.
Companies that provide credit repair services start by reviewing your credit reports and gathering information necessary to dispute inaccurate entries. Errors found on your credit report, like a missed payment that wasn’t actually missed or an account reported that isn’t actually yours, bring down your credit score.
Credit repair companies send dispute letters to the credit reporting agencies – Equifax, TransUnion, and Experian – and work on your behalf to get the incorrect information removed in a timely fashion.
Credit repair services are provided in return for a fee which varies depending on the company you choose. Some charge per item removed while others charge a flat fee for disputing a certain number of entries per month. Overall, credit repair companies can be a helpful tool in sprucing up your credit report but understand getting through the process takes time.
Final Thoughts
Both credit counseling and credit repair companies can work to your benefit in bettering your financial situation. If you’re looking for education about your financial circumstances and how credit fits into the mix, credit counseling services should be your first stop.
On the other hand, if your credit report is spotted with errors and outdated information, a credit repair company can offer a valuable benefit toward improving your credit file and helping you understand how to improve your credit score.
