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Are Credit Repair Companies a Bad Idea?

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In a Nutshell

If a credit card repair company is telling you that your debt can be wiped out and you can start over with a new identity, stop listening. These types of credit repair company scams steal Social Security numbers and account information. That doesn’t mean the credit repair industry doesn’t have any legitimate credit repair agencies. They’re just hard to find.

Written by the Upsolve TeamLegally reviewed by Attorney Andrea Wimmer
Updated July 7, 2023

If a credit card repair company is telling you that your debt can be wiped out and you can start over with a new identity, stop listening. These types of credit repair company scams steal Social Security numbers and account information. That doesn’t mean the credit repair industry doesn’t have any legitimate credit repair agencies. They’re just hard to find. You can repair your own credit issues yourself and save money. Keep reading to learn more about credit repair companies and why it might be a good idea to repair your credit yourself. 

What’s a credit repair company?

There are credit repair services and there are credit counseling services. Each has different goals. A credit counselor is focused on how you can resolve your debt, but a credit repair company is focused on looking for mistakes and inaccuracies to help improve your FICO credit score. The methods they use—making phone calls, sending letters, and submitting forms— are the same methods you can use to repair your credit. If you’re capable of filling out a credit application, you’re capable of repairing your credit report.

A legitimate credit repair company helps you remove inaccurate information from your credit report. Most companies charge a monthly or flat-rate fee for their services. Some offer repair packages. Reputable companies tend to offer a 90-day money-back guarantee. Scam credit repair companies will use illegal methods to remove information. They might pretend your identity was stolen when it was not and tell you to start over with a clean slate.

A credit repair company must follow the laws under the Credit Repair Organization Act (CROA) as well as laws under the Fair Credit Reporting Act (FCRA), the Consumer Financial Protection Act (CFPA), and the Telemarketing and Consumer Fraud and Abuse Prevention Act. Companies that violate these laws can be sued. Credit repair companies don’t always follow the law. 

Before the COVID-19 pandemic, the Consumer Financial Protection Bureau served a legal complaint against two of the largest credit repair companies in the country for violating some of these laws. The complaint alleges that and Lexington Law advertised that a home loan was guaranteed. No loans were provided. The companies also took money upfront, which is illegal. People with poor credit paid hundreds of dollars to clear up their credit

If you’re looking into credit repair companies, check their record with the Better Business Bureau (BBB). Also, make sure there are no complaints against them on the Consumer Financial Protection Bureau (CFPB) website or the website for your state’s attorney general

How Credit Counseling Works

Nonprofit credit counseling agencies are cheaper than credit repair companies. A credit counselor’s primary focus is helping you create a plan to manage your debt. They may or may not help you clear up your credit report. A nonprofit credit counseling agency will give you a free consultation to discuss your debt and credit repair options. To avoid being scammed, make sure a credit counselor is accredited with the National Foundation for Credit Counseling (NFCC).

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How Credit Repair Companies Work

The primary responsibility of credit repair companies is to make sure your credit report is accurate. Credit reporting agencies often report inaccurate information. The information on your credit report contributes to your credit score, so removing errors can improve your score. A credit repair company typically offers to review your credit report, perform a FICO credit score analysis, and contact credit bureaus on your behalf to dispute errors. They may even offer you budgeting and debt settlement advice along with a credit score tracker. A case advisor will likely be assigned to manage your case. 

Truthful credit reporting is at the center of laws that regulate credit reporting and repair. A credit repair company cannot lie about the information on your credit report. They cannot remove information that is accurate and timely, even if it’s negative. Any credit repair company offering to wipe out your bad debt is a red flag. You can review your credit report yourself and dispute errors to save yourself money. You can use the money you save to pay off debt. After you clean up your report and pay off your debt, you’ll get lower interest rates and that will save you money. 

Dispute errors on your credit reports.

Incorrect negative information on your credit report will hurt your credit score. The time it takes to correct these mistakes is an investment in your financial future. That’s why a good way to start your credit repair is by disputing errors on your credit report. You can order a free copy of your credit report from each of the three major credit bureaus by visiting the government-approved website The three major credit bureaus are Experian, Equifax, and TransUnion. By law, each of them must give you a free credit report every year. 

Once you receive your credit reports, review each one carefully. Make sure your name and address are accurate. Double-check your account numbers and balances. Look for tax liens, bankruptcies, and charge-offs (debt that’s been sent to a collections agency). If you see a debt that you’ve already paid, you’ll want to bring that to the attention of the creditor. If a bankruptcy or charge-off should have been removed from your credit report, repairing the error could improve your credit score. 

To dispute the errors, start by calling the creditor. They may have made a mistake that can be quickly adjusted. Creditors have a legal responsibility to report accurate information. Be sure to record information about your phone call in case you run into any difficulties. 

You should also put everything in writing. You can send a cease-and-desist letter to collection agencies to tell them to stop contacting you. You can write a letter to request validation of your debt. All collection activity will stop until the debt is investigated. You should also write a dispute letter to your creditor and collection agency disputing any errors or information on your credit report that is different from your records. The Consumer Financial Protection Bureau has sample cease-and-desist letters and other helpful letter templates. 

Negotiate for a less negative credit report.

Reviewing your credit report gives you a chance to discover who your creditors are. Once you know your creditors, you can call them to try to negotiate a debt settlement that includes a change in credit reporting. But keep in mind they cannot report inaccurate information. Credit repair companies have a slight advantage here because they are more familiar with what creditors are willing to revise on credit reports in exchange for a debt settlement. 

Share professional tips.

Legitimate credit repair companies work closely with creditors, credit reports, and credit scores. Specialization allows them to go beyond fixing disputed information. They can guide clients through the credit repair process and provide tips on how to improve their credit moving forward. 

What Credit Repair Services Don't Include

Credit repair services cannot wash your credit report clean of all late payments and bad debt and give you a new credit score. If a credit repair company promises to remove a valid negative item, then the company is not legitimate. They also cannot help you build your credit from scratch. That’s something you must do with careful planning and responsible credit behavior. 

The Credit Repair Organizations Act (CROA) makes it illegal to create a new identity to build credit. If a company trying to sell you credit repair services tells you that they can make changes to your identity to prevent the display of certain aspects of your credit record, the credit repair company is violating the law. 

How much do credit repair services charge?

The fees for credit repair services vary. Some charge monthly fees from $10-$50, and others charge a flat fee that runs hundreds of dollars. Most will charge a first work fee. The first work fee is an extra one-time charge to open an account. The first work fee can be anywhere from $15 to $200. As with most products and services, the price depends on the company. Some companies will even charge on a per-item basis. For instance, you would have to pay a certain amount for each item removed from your credit report. Others will offer a repair package.

Regardless of pricing, credit repair services cannot accept payment from you before the services are provided to you. That is prohibited under the Credit Repair Organizations Act. (You can find the exact law under Title 15 of the United States Codes Section 1679b if you need to point it out to a credit repair company.) The Telemarketing Sales Rule under the FTC states the credit repair agency must wait six months for payment, though some credit repair industry associations are trying to fight this in court. 

The best credit repair companies will have an A+ rating from the BBB and promise a 90-day money-back guarantee and unlimited disputes. 

How long does credit repair take?

Credit repair isn’t going to happen overnight. It will take at least a month or two. The exact timeline will depend on your individual circumstances and on the companies you are working with. The Fair Credit Reporting Act (FCRA) requires credit bureaus to investigate dispute validations within 30 days of receipt. They must verify the debt and confirm its accuracy. They then have five days to notify the person of the results of their investigation. 

This timeline can get extended if you dispute an item after requesting an annual credit report or if you submit additional information in the middle of the dispute. If that happens, a 15-day extension is added to the timeline, and it will take 45 days for an investigation. 

Avoiding Credit Repair Scams

There are some very legitimate-looking companies out there that are not legitimate. If a company does any of the following, the company is likely violating consumer protection laws and may not be legit:

  • Asks you for payment before performing any services

  • Tells you they can get you a new identity

  • Tells you that they can wipe out all or most of your bad credit

  • Provides inaccurate information

  • Makes promises that sound too good to be true

  • Doesn’t inform you of your legal rights

  • Offers to fix your credit overnight

Be sure to review a company’s profile on the Better Business Bureau (BBB) website to see if any complaints have been lodged against them. Reputable companies tend to offer free or low-cost counseling, and they will inform you of your legal rights before providing you with any services. 

Do It Yourself

There’s no secret strategy to credit repair. It boils down to four steps:

  1. Evaluate your credit report.

  2. Fix the errors.

  3. Settle the debt you can settle.

  4. Improve your personal finances to benefit your credit. 

You can take these steps, or you can pay someone else to help you take these steps. If you do it yourself, you can use the money you save to pay down your debt.

Where to start

Closing your credit accounts isn’t always the best option. You can learn more about DIY credit repair from Upsolve and through numerous books that are on the market. Meanwhile, request your credit report using the method we discussed above. Check for errors in your name, address, account numbers, monthly payments, and balances. Be sure to dispute inaccuracies and request debt validation. 

Other essentials to consider 

It takes time to transform your bad credit into good credit. Reorganizing your finances so you can avoid late payments is a good first step, but your credit score won’t skyrocket overnight. It’s also important to manage the amount of available credit you’re using versus how much you’re paying down during the credit repair process. You’re not going to repair your credit if you sign up for a credit repair plan then continue maxing out your credit cards and missing payments. Be sure to prepare for financial emergencies to avoid overspending on credit cards. 

If your credit is suffering because of late payments or lapses in your ability to pay, take time to learn more about how timely payments affect your credit report and credit score. Then, develop a plan for your personal finances that helps you repair your credit.

You can repair your credit yourself, but if you suspect fraud or are having problems with a certain debt collector, be sure to talk to an attorney. You have the right to sue for credit repair fraud. It’s also wise to talk to a professional if your finances are complicated and you’re planning for future purchases and expenditures. 

Let’s Summarize...

You can repair your credit yourself or get help from a legitimate credit repair company or credit counselor. Taking the time to request and review your credit report is the first step to repairing your credit. Disputing errors and requesting debt validations will help confirm the accuracy of your credit history. Managing your budget and credit cards and paying off your debt are the final steps to repair your credit. Why not take a step today?

Written By:

The Upsolve Team

Upsolve is fortunate to have a remarkable team of bankruptcy attorneys, as well as finance and consumer rights professionals, as contributing writers to help us keep our content up to date, informative, and helpful to everyone.

Attorney Andrea Wimmer


Andrea practiced exclusively as a bankruptcy attorney in consumer Chapter 7 and Chapter 13 cases for more than 10 years before joining Upsolve, first as a contributing writer and editor and ultimately joining the team as Managing Editor. While in private practice, Andrea handled... read more about Attorney Andrea Wimmer

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