Americans in debt often receive all kinds of advertisements for debt-related services.
Some companies offer consolidation in the form of loans, balance-transfer credit cards or credit counseling. Others promote debt settlement programs that can, when successful, reduce the actual amount of debt owed to creditors. Yet others publicize their ability to help consumers fix mistakes on their credit report so as to boost their scores. With all these different debt-adjacent services available, it can take some time and effort to understand which one may actually fit your financial situation.
In this article we’ll discuss credit repair companies, using one called Lexington Law as the example. Keep reading to learn more about what to expect when working with a company like Lexington Law.
The Verdict: No, Credit Repair Cannot Get You Out of Debt
It’s important to understand up front that debt relief and credit repair are two different things.
Credit repair companies work on customers’ behalf to get incorrect negative information deleted from credit reports. A Consumer Reports study of more than 5,800 volunteers found that more than one-third of participants found at least one error on a credit report when they checked.
These errors can damage scores unless they are disputed and removed, which is where credit repair companies come in. Consumers can also dispute these errors on their own for free — using a credit repair service like Lexington Law requires a fee.
What credit repair companies do not dabble in is getting consumers out of debt. One of the Lexington Law reviews online from Bills.com points out how credit repair will never wipe out or negate unpaid debts on your record. You still have to figure out a way to pay these debts in full or settle them to get them removed.
This is more the domain of debt consolidation, management or settlement than it is credit repair — all solutions that generally take years to complete and may actually negatively affect credit in the short term until the debt has been addressed and you can begin rebuilding your credit once again. Any company implying it can instantly knock debts off your credit reports is lying.
What Can Credit Repair Companies Like Lexington Law Do?
If credit repair companies cannot get customers out of debt, what can they do exactly?
Credit repair is about disputing errors, like debts still listed as unpaid on credit reports that you can prove you already paid off in the past. As Experian writes, credit repair firms can dispute negative information on credit reports if you feel the information is erroneous. Industry legislation also requires that credit report organizations:
- Only take fees after they have performed a service.
- Must provide a written contract explaining their services.
- Must avoid asking or implying customers should misinform credit reporting agencies about anything found on your reports.
- Cannot make fake claims about the scope of their services.
The idea here is that removing errors from your credit reports will improve your scores. This is something every consumer has the right to do on their own for free. Some people may choose to outsource the task to credit repair companies if they are fine with paying a fee, but credit repair companies ultimately do not do anything beyond what consumers can do for themselves.
All three credit reporting bureaus, TransUnion, Experian and Equifax, have online forms you can fill out to dispute errors on your own if needed. Be prepared to show documentation any time you do so.
Trying to use a credit repair company to get out of debt is a case of barking up the wrong tree. For that, you’ll want something like consolidation, settlement or a debt management program.