The Common Law

Bad Credit – Should I Hire a 'Credit Repair' Company?

I'm trying to buy my first home but am having trouble qualifying for a decent loan due to my bad credit. I'm thinking about hiring a credit-repair service but have heard mixed things. Can a credit-repair service help me?

Potential creditors look at your credit report in order to evaluate whether you are a good risk for the loan. Specifically, creditors look to your credit score, a three-digit number between 300 and 850, to evaluate your creditworthiness. Your credit score affects many things, including whether you can obtain a loan or credit card, interest rates, and insurance premiums. With all that emphasis on a credit score, many consumers have turned to credit-repair companies to help increase their credit score. But is this a good idea?

Generally, no. A credit-repair company can help remove inaccurate information from your credit report, but this is something that you can do yourself. It might make sense to hire a credit-repair service if you don't have the time or want to deal with the hassle of correcting credit-report inaccuracies or errors yourself (one error takes an average of four hours to correct).

However, it is important to know that there is no legal way to have accurate but negative information removed from a credit report. This is where credit-repair services sometimes get into trouble – scams occur when customers are misled into thinking that accurate, negative credit-history items like bankruptcy, defaulted loans, and unpaid debts will be cleared up by the credit-repair service.

Credit-repair service companies are required to follow specific guidelines from the Credit Repair Organizations Act. Be sure to run (don't walk) away from any credit-repair service that 1) tells you it can repair accurate, negative credit history; 2) asks you to pay up front for the credit-repair services before they are provided; or 3) tries to create a new credit identity for you.

Hiring a credit-reporting service will only help correct inaccurate reports on your credit. You can save money by doing this yourself.

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Marrs, Ellis & Hodge LLP,

The material in this column is for informational purposes only. It does not constitute, nor is it a substitute for, legal advice. For advice on your specific facts and circumstances, consult a licensed attorney. You may wish to contact the Lawyer Referral Service of Central Texas, a non-profit public service of the Austin Bar Association, at 512-472-8303 or

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