credit repair.


do your research


like we say with most other things, take the time to get informed before agreeing to anything. find out who the repair firm is and what they are about. each company is going to do their process a little different, so make sure to read the full agreement, but here are some points you want to make sure are crystal clear:

  1. what's the company's process?

  2. how do they get paid?

  3. can you terminate the agreement?


will working with a credit repair company stop the harassing phone calls and get you out of debt? *Yes and *Yes, but with two really big asterisks.


the asterisks.


in prior dealings with such firms, the client (you) provides a limited power of attorney to give the company permission to speak on your behalf and negotiate with the banks. that is why the calls stop. the repair firm becomes the direct point of contact for handling the debt. your phone may stop ringing, but that does not mean your creditors are getting paid…more on that below.

you may eventually be out of debt, but this is where these types of companies may differ the most. which bring asterisk number two. you want it to be clearly defined on how the company will resolve your debt and how they'll get paid. some companies will pool your debt; possibly lowering your monthly payments, and reducing multiple payments to one. in these instances, you will pay the repair firm directly and they will begin to save up your funds, short of their fees. in time, your account will have enough to potentially settle your balance with a creditor.

in some situations, your bill may still be with the original bank, meaning there could still be interest and fees accruing while the account goes unpaid. it is possible, based on the pooling method explained above, that your credit gets worse before it gets better. as the repair firm is waiting for you to have enough money to begin making settlement offers, your accounts may be falling farther behind. and once your funds are used up to settle with the first bank that will make a deal, the whole process starts over again until there is enough money to hopefully make a deal with the next creditor.

it could take years for this process to play out depending on the balances you owed, which is why you want to know your options for ending the agreement with the repair company. if your situation changes, you want the flexibility to begin handling your debts directly again and quit paying for the repair service.



disclosure: the ideas, thoughts, and opinions in this article are our own, except where sources are specifically cited, and are property of millennial financial planning. this article is intended for informational purposes only, and does not serve as direct financial advice. speak with your financial professional for direct advice and guidance. all investments contain risk and the potential loss of principal.


“get informed before agreeing to anything.”