Alternatives to credit repair: 4 other paths to a better score

Poor credit can happen to the best of us: a layoff, sudden medical bill or simply not having the time or immediate need to build credit can all lead to a low score. But a low credit score does not have to be permanent. Many people turn to credit repair companies.

And while credit repair can be a means to improve credit, working with a credit repair company isn’t right for everyone — and it isn’t your only option. Consider credit repair alternatives to see if one may be a better fit for repairing your credit and expanding your access to financial products.

1. Do it yourself

DIY credit repair is best for a patient consumer whose budget is already too tight to add on another expense.

The DIY approach to credit repair requires you to do the heavy lifting to restore your credit health. Yes, a credit repair company likely has experience working with cases like yours. Still, it can’t do anything you can’t do on your own.

Even better, repairing your own credit will cost a fraction of the price — likely no money at all. That said, you must do a little legwork. You’ll get copies of and study your credit report, file disputes for any errors found and await results. While it may feel intimidating, DIY credit repair can help you avoid additional monthly fees and, ideally, better understand your credit health.

Pros

• Can help you avoid additional fees.
• Step-by-step guidance is available.
• Can be empowering to handle it on your own.

Cons

• Requires more time than hiring someone.
• Can be challenging to communicate with credit bureaus.
• Removing disputes must be done in a very specific manner.

2. Improve your payment history

Improving payment history is best for those whose main driver of poor credit is missed payments and who are eager to take control of their finances.

Your payment history accounts for 35 percent of your total credit score — it’s the single biggest factor. So, if your credit score is low, improving your payment history may provide a significant boost. Your payment history includes any credit-related products, like credit cards, lines of credit, mortgages, auto loans and personal loans.

To do this, you must pay your bills on time, get current on past-due accounts and communicate with your lenders if you might miss a payment. The latter allows you to make payment arrangements with your lender, which could help you avoid adverse credit reporting. It’s also wise to enroll in automatic payments to avoid potential late fees.

Pros

• Can create a better monthly payment routine to ensure you don’t fall behind.
• Will reduce or eliminate fees for late payments.
• No cost to an outside company outside of repaying missed bills.

Cons

• Can be a long process.
• Requires time for your score to see improvement.
• No additional expert support.

3. Consider debt consolidation

Debt consolidation is best for those who struggle to handle multiple debt payments and will commit to a repayment plan while modifying spending behaviors.

Debt consolidation is a process of combining multiple accounts into a single one to streamline repayment. One way to do this is through a debt consolidation loan.

Using this type of loan to consolidate revolving debt, such as credit cards, could lower your credit utilization ratio. Credit utilization accounts for 30 percent of your FICO score. Consolidating debt can also make it easier to stay on top of repayment, as you will only have to worry about a single due date. You could also save money in the long run, as these loans tend to have lower interest rates than most credit cards.

You’ll want a credit score of 670 or higher to have a better chance of securing a competitive rate. But even with a lower score, you may find better rates than your existing ones — prequalify to find out.

Pros

• Can streamline repayment, making it easier to pay on time.
• Could make debt more manageable by lowering your overall interest rate.
• Could speed up debt repayment by having a set timeline.

Cons

• Good-to-excellent credit required to secure the lowest rates.
• Some lenders may charge origination fees.
• Could lead to an increased debt load if poor financial habits aren’t addressed.

4. Work with a credit counselor

The ideal candidate for credit counseling is someone who is willing to learn and adapt their spending habits.

If a traditional credit repair company is not the right option for you, a credit counselor can be one of the alternatives to credit repair. You’ll benefit from attentive guidance from an expert. Nonprofits may offer credit counseling at no or minimal cost.

You will work with a trained professional who will take a close look at your current spending habits, debt load and credit reports. Based on their analysis of your financial health, you will receive a tailored action plan to address your financial issues. One approach is a debt management plan, which focuses on making your balances on unsecured debts more manageable so you can pay them off sooner.

Pros

• Advice tailored specifically to your financial situation.
• Potential to address and fix consistent financial missteps.
• The counselor may help with creditor negotiations.

Cons

• Some companies require a monthly payment for service.
• If your debt is more or less under control, it may not help.

When should you consider a credit repair company?

Credit repair companies work to improve your credit for a fee. They seek inaccuracies in your credit report and file disputes with the credit bureaus.

These issues may include closed accounts that appear open, incorrect account balances and accounts that don’t belong to you. Though you can do this yourself for free, it can be time-consuming.

Hiring a credit repair company may be a good idea if:

1. You’ve been diligent with your payments and your credit hasn’t improved.

2. You’d rather have a professional handle it and can afford the fees.

It’s also worth noting that credit repair companies can only fix actual mistakes. For instance, imagine a history of late payments is dragging down your score. If there’s proof those payments were, in fact late, the credit repair company can’t dispute them. Make sure you understand what credit repair companies can and can’t fix before signing up for this service instead of the options other than credit repair.

Bottom line

If you need credit repair, you are not alone. But if working with a credit repair company feels intimidating or doesn’t quite fit your needs, there are other options. Consider a DIY approach, focus on improving your payment history, consolidate debt or work with a credit counselor to improve your credit profile and overall financial health to meet your credit score goals.