If your credit is less than perfect but you want to buy a home, you might be looking for the quickest way to reach your homeownership goals. In some cases, credit repair companies may seem like a good option for doing just this. But are they all they’re cracked up to be?
Credit Repair: Safe or Scam?
There are two types of credit repair that you will commonly come across. One is legit–and one is not. Common sense can guide you.
Reputable credit repair companies offer credit repair to certain clients who have negative marks on their credit reports by using a lawyer or paralegal to dispute negative credit entries on their credit report. In many cases–especially with older negative entries from collection agencies– the agency will either not have the appropriate documentation to support the entry remaining on the consumer’s credit, or they will not respond in time. If either of these situations occur, the negative entries will be removed from your credit report.
The other type of credit repair company is typically a scam, and usually offers something like giving you a new Social Security Number to use for loan applications. They may also promise to wipe your negative credit free of all negative marks. First and foremost, if any company offers you a new Social Security Number, be warned that it is a scam. It is also highly illegal. Steer clear of these companies.
Alternately, companies who offer big promises to raise your credit score a certain amount or remove every negative entry from your credit report should also be avoided. No reputable credit repair company can guarantee a certain jump in credit score or specific results. They can give you a consultation where they look over your credit and tell you what looks feasible for them to be able to dispute, but beyond this, credit repair relies somewhat upon skill and luck to be successful.
Of course, the benefit of choosing a reputable credit repair company to help bring your credit score up so that you can buy a home is that they typically employ legal teams who understand specific laws that apply to credit reports and debt collections. The good part of this is that you will increase your chances of having negative entries removed because these entities have extensive knowledge of debt collection law.
What’s It Cost?
There are reputable credit repair companies throughout the U.S. that could, indeed, improve your chances of buying a home. Research these companies extensively before signing up for any of them, and be aware that there are charges for their services.
Typically, credit repair companies charge an up-front retainer that costs between $75 and $500 and then charge a monthly fee for their ongoing services. Some companies only charge a one time up-front fee, which can range anywhere between $500 and $2000 or more. Shop around multiple credit repair companies to find one that has great reviews, makes no guarantees, has a long history of success, and a fee you can afford.
Do Your Homework
So here’s the bottom line: when it comes to credit repair, it’s up to you to do your homework. Research potential companies extensively online using helpful websites like the Better Business Bureau and user-input review sites like MyFICO Forums and Yelp. Go into your credit repair journey without huge expectations, but hope for the best.
Make sure you consult with all credit repair companies with which you are considering before signing anything. They should manage your expectations from the get-go, lay out the credit repair process, and let you know specific information on timelines. You should know going in approximately how long you will be in the program and what to expect as your case progresses. If you feel in the least bit uneasy about the transaction or the company, do not proceed. You should feel confident in your decision.
But Will It Help You Buy a House?
While we can’t make guarantees that going through a credit repair program will make you eligible for a home loan, it may help. Anything that will remove negative entries or collections from your credit report will positively impact your credit and likely increase your credit score, which could help you to qualify for a mortgage or get a better rate on one.
NLC Loans has mortgage options for individuals with credit scores as low as 580. If you’re not sure if your credit is mortgage ready, call one of our Personal Mortgage Advisors at 877-480-8050 for a free mortgage consultation and we’ll take a look at it and let you know where you stand. After all, there’s nothing we’d like more than to help you experience what home should feel like!