Do Credit Repair Companies Really Work

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Overview: Nosotros surveyed 500 Americans (ages 25+) who had paid for professional credit repair services to learn about their experience and results working with credit repair companies.

🎯 Written report Goals:

Our goal was to decide the actual impact credit repair companies have on the consumers they help. We wanted hard statistics that showed:

Do credit repair companiesreally work?
How much do consumers pay for credit repair?
How long do clients stick with the repair companies?
What services do credit repair companies really do for their clients?

☝️ Not Our Intention:

It was incomparably Non our goal to evidence that credit repair services accept a positive impact on their clients' credit scores. Nosotros are neutral on the matter at FinMasters, as we first promote do-it-yourself credit comeback, and merely recommend repair services to people who truly have zilch time (or desire) to work on their credit.

Please experience free to use the quick skip links beneath, or scan the data at your ain pace.

Written report Key Findings

Effectiveness of Credit Repair

48% of respondents who used credit repair services for half-dozen months or moresaw an increase of 100 points or more than to their credit score
100+ point gains dropped to 33% if the respondents simply used credit repair services for 1 to 2 months
The virtually common credit score gainsreported were 100 to 149 points(26% of respondents) and 75 to 99 points (17.2% of respondents) compared to just 8.iv% who reported a proceeds of 0 to 24 points.

Price of Credit Repair

31% of respondents said the lifetime total of all monthly fees, start-up costs, and additional fees was between $250 to $500 (near prevalent answer)
17% said their lifetime total was less than $250
32% of respondents spent over $750 on credit repair services. Of these big spenders, 48% reported a credit score gain of 100 points or more

Customer Experience of Credit Repair Companies

67% said their overall experience was "Skilful" or "First-class". Among clients who spent at to the lowest degree 3 months with the repair visitor, this figure increased to 71%
6.6%reported a "Bad" experience
87%of respondents thought their repair company's business organisation practices were"Professional" or "Fair"
12% of respondents thought the repair visitor's business practices were "Shady" or "Borderline illegal"

What Counts equally "Credit Repair?"

Credit repair in our study referred to paying a professional service to clean up a consumer's credit report (such every bit removing collections or late payments) with the goal of increasing their credit score. Examples of pop credit repair companies are:Lexington Law, CreditRepair.com, and Ovation.

Cost of Credit Repair

How much does credit repair really price? We've got the answer!

To ensure we only surveyed credit repair clients, we added knockout questions to our survey that eliminated consumers who had used free or paid services such equally:

Costless or paid credit score services – (Credit Karma, Credit Sesame, MyFico)
Bank, Credit Union, or credit carte du jour scores
Credit Agency scoring or credit report services

Statistics on the True Cost of Credit Repair

We did non visit any credit repair companies' websites to bring y'all the trust cost of credit repair. These are the results from our actual surveyed consumers who paid for credit repair.

Here are the numbers:

17% of respondents said their lifetime full wasless than $250
31% of respondents said the lifetime total of all monthly fees, first-upward costs, and boosted fees was betwixt$250 to $500
nineteen% paid between$501 to $750
16% of respondents said the lifetime total was betwixt$751 to $1,000
xvi% spentover $i,000for all services received

But of course, the amount spent correlated with how long the respondents stuck with their repair visitor. See this nautical chart:

Cost of Credit Repair Statistics — Cost of credit repair

Hither are the top answers to how long our respondents used their credit repair company:

3 to v months – 31%
six to 9 months – 23%
1 to two months – 22%
10 months or more – xviii%

As shown in the nautical chart above, we found a potent correlation between the duration a consumer worked with the credit repair visitor and the amount of money they spent. Hither are some statistics on that:

38% of respondents who worked with a credit repair company for at least 6 months spent over $750 compared to 28% who spent over $750 and worked with the company for only 5 months or less
32%of all respondentsspent over $750 on credit repair services. Of these big spenders,48% reported a credit score gain of100 points or more

Credit Score Gains from Credit Repair

Nosotros also wanted to detect out if credit repair companies really work. To find this out, we asked our survey subjects:

what their credit score was prior to working with their company
overall impact to their score
and their current credit score

Overall, we constitute strong prove to back up the merits that credit repair companies have a positive impact on their clients' credit scores, especially when spending more time with a client.

The most common credit score gainreported was 100 to 149 points(26.3% of respondents)
The highest percentage of respondents (44.six%)started receiving credit repair service with a 300 to 579 score , while 33.4% started with a 580 to 669 score
15.four% of all respondents received more 150 indicate credit score increase
Respondents who started off with a 300 to 579 (the lowest range of scores) received the highest increase in scores, with 49.3% getting a 100+ point increase
Respondents who received Bankruptcy recovery services raised their scores college than the recipients of any other services, with53.5% reporting a 100+ indicate gain

Credit Score Gains Statistics from Credit Repair Services — Credit score gains from using credit repair services

Nosotros too found a correlation between the length of time a consumer stayed with their repair visitor and college increases in credit score.

48% of respondents who used credit repair services for 6 months or more got an increment of 100 points or more to their credit score
This dropped to 33% if the respondents only used credit repair services for ane to 2 months

Marketing Analysis: How Consumers Detect Credit Repair Companies

We also asked how the respondents kickoff found their credit repair company. Here were the answers from highest to lowest percent:

Online search – 45.four%
Referral –37.ii%
Advertisement –13.4%
Phone Solicitation –2.8%
Other –1.0%

We dove deeper into the height two sources of clients for credit repair companies (online search and referral), and discovered the following:

Online search clientsspent more, on average, than Referral clients.55.5% spent over $500 while merely 48.9% of clients who came past referral spent over $500
Clients who came from * Advertisements or Phone Solicitation spent the least on credit repair –46.four% spent over $500
Online searchers and Referral clients experienced similar credit score gains. Online search clients experienced a credit score increase of100 to 150 points (27.8%) compared to26.three% of Referral clients
Referral clientsexperienced fewer billing problems.61.iii% reportedno billing issues, while 51.ane% of Online Search clients reported no billing issues
Clients who came via Advertisement and Phone Solicitation were by far the least happy. 54.9% reported their overall experience was"Good" or "Excellent" compared to a combined 69.8% of Referral and Online search clients who reported a good or excellent experience.

*We've combined respondents who plant their company via Advertisement or Telephone Solicitation in our results to a higher place for greater statistical significance. We only had fourteen respondents (2.8%) who became a client through phone solicitation.

Services Received past Credit Repair – The Stats

Possibly you're wondering what credit repair companies actually exercise for their clients.

Credit repair companies are mostly known for helping their clients remove inaccurate or dissentious items from their clients' credit reports.

All the same, many of them claim to offer a host of other services from credit counseling to identity theft recovery.

We asked our respondents what their credit repair company actually did for them, and here were their answers.

Top services received:

Removed negative items (late payments, collections, charge offs) – 56.2%
Credit consulting – 49%
Set upwardly payment plan with creditors – 48%
Debt consolidation – 46.6%
Sent dispute messages to the credit bureaus – 39.viii%
Sent "Goodwill letters" to creditors – 28.6%
Sent cease and desist letters to creditors – 24.viii%
Identity theft recovery – 21%

Of these services, the respondents who had " goodwill letters " sent to their creditors on their behalf reported the best overall experience (76% reported an overall "good" or "first-class" experience). This group besides independent the highest percentage (54.5%) of people whose credit scores improved by 100 points or more.

We also asked which items the credit repair companies were able to successfully remove from their credit report.

Here were the elevation eight answers starting with the almost prevalent:

Collections – 55.2%
Belatedly payment – 53.6%
Medical bills – 43.8%
Charge offs – 30.six%
Research – 25.eight%
Judgments – 20.viii%
Student loans – 17.viii%
Defalcation – 11.2%

Respondents who received Bankruptcy recovery services raised their scores higher than the recipients of any other services, with 53.5% reporting a 100+ signal gain.

Customer Feel with Credit Repair Companies

Sometimes the financial industry takes shots at and casts a negative light on credit repair companies. We wanted to know how actual credit repair clients felt about the service they received.

We asked their opinion on:

their overall experience
the company's concern practices (marketing, customer service, billing, etc)
if they were charged for anything they felt was inaccurate

Here'due south what nosotros constitute:

67% said their overall experience was "Good" or "Excellent"
26.4% reported an "Okay/Neutral" experience
6.6%reported a "Bad" experience
87%of respondents thought their repair company'south business practices were"Professional" or "Off-white"

We also institute that clients' overall opinion of the credit repair company was much more favorable if they received a squeamish credit score increase. See the nautical chart below.

Credit Repair Business Practices Statistics — Credit repair business practices

We were not happy to see that amongst credit repair clients, a sizable portion experience their company was shady, deadline illegal, and experienced billing problems.

12% of respondents thought the repair company's business practices were "Shady" or "Deadline illegal"
25.eight% thought the credit repair visitor kept them as a client longer than it should have taken – They felt "strung along"
eighteen.6% said the credit repair company made it difficult to cancel
55.ii% of all respondents said the billing was every bit agreed

Conclusions

Nosotros were not happy to encounter some of the damning results from this report. Many of our respondents reported billing inaccuracies, a problem that must be corrected. Imagine if only 55% of Netflix subscribers reported correct billing. That would not be very good. Even so, that's the unfortunate statistic nosotros take for credit repair companies.

Having said that, the report provides overwhelming testify that professional credit repair companies exercise brand a positive impact on the credit scores of their clients. There is also a significant correlation betwixt the amount of fourth dimension a client sticks with their repair company and bigger credit score gains.

If consumers do seek credit repair services, we recommend that they continue with caution, research the best companies online, and ask around for referrals. If they move forward, they should program to stick with the company for several months for the best results.

Copyright Information:
All the data included in this study is available via public domain. This means all statistics may be copied without permission. Nosotros do, all the same, appreciate citation as the source via a link.

Researcher:
Chris Huntley, Certified Credit Consultant

Resources: