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Credit Restoration: What Is It & How Can It Help Me?

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In a Nutshell

Credit restoration is a process you can use to improve your credit rating. You don’t need to hire a special credit restoration company to restore your credit; you can take steps to repair your credit yourself. In this article, we’ll discuss credit restoration, the Fair Credit Reporting Act, and the pros and cons of hiring a for-profit credit repair/restoration company. We’ll also explain how you can repair your credit yourself for free.

Written by Lawyer John Coble
Updated October 1, 2021

Credit restoration is a process you can use to improve your credit rating. It’s also known as credit repair. You don’t need to hire a special credit restoration company to restore your credit. In fact, it's usually best to start any credit repair with a visit to a nonprofit credit counseling agency. These credit counseling agencies will help you free of charge.

In this article, we’ll discuss credit restoration, the Fair Credit Reporting Act (FCRA), and the pros and cons of hiring a for-profit credit repair/restoration company. We’ll also explain how you can repair your credit yourself for free.

What Is Credit Restoration?

Credit restoration is the term used to describe the process of reviewing your credit report, finding errors, and sending credit dispute letters to address those errors. Some people also try to get creditors to remove accurate negative items from their credit history. The Fair Credit Reporting Act (FCRA) requires creditors and credit bureaus to remove inaccurate items from your credit report. But there is no law requiring them to remove accurate information. The three major credit reporting agencies, Equifax, Experian, and TransUnion, will not remove accurate information. Usually, creditors won't remove accurate information either.

Your credit is important. A good credit score is necessary to get loans, mortgages, and credit cards at good interest rates. A prospective landlord might also check your credit before leasing you an apartment. In most states, employers can check your credit as a condition of employment. So, a bad credit score could hurt your chances of getting the job you want.

In most cases, it's best for you to handle credit restoration yourself or with the help of a nonprofit credit counseling agency. It might be a good idea to hire a credit restoration company if you don’t have time to dispute all the errors on your credit report, but this will cost you money. We’ll explore this more below.

Your Rights Under the Fair Credit Reporting Act (FCRA)

The FCRA does not include the term "repair" anywhere within its text except to refer to the regulation of credit repair organizations. The FCRA does give you the right to dispute information on your credit report you believe is erroneous, but it doesn’t give you the right to change accurate items on your credit report. You can request changes through goodwill letters or pay-for-delete negotiations, but credit agencies and creditors do not have to honor those requests.

Typical Credit Report Errors

Errors are common on credit reports. The Consumer Financial Protection Bureau (CFPB) lists the following common errors on its website:

  • Your name, phone number, or address is wrong.

  • Accounts are listed that belong to someone who has the same or a similar name as you.

  • There are unfamiliar accounts on your report because of identity theft.

  • Accounts you've closed are showing as open.

  • You're showing as an account owner when you're only an authorized user.

  • You have accounts showing late payments or missing payments that have always been paid on time.

  • You have the same debt appearing multiple times, sometimes with different names.

  • You had incorrect information removed, but now it's back.

  • You have collection accounts that appear multiple times with different debt buyers, collection agencies, or creditors.

  • You have accounts that are reporting an incorrect balance.

  • You have accounts with an incorrect credit limit showing.

It's important to realize most of these errors have simply been misreported by the creditor and/or credit bureau. Still, it's important to deal with these errors as soon as possible. They may also be evidence of fraud or identity theft.

What Credit Restoration Can’t Do

Credit restoration has its limits. It can’t help you remove negative information from your report that is accurate, like a repossession or foreclosure. You have no legal right to remove accurate information. Though you can ask creditors to remove accurate information. 

Some items on your credit report come from the credit bureau itself, not from the creditors. These are public record items such as bankruptcies, liens, or judgments. At the moment, you don’t have to worry about liens or judgments because the credit bureaus aren’t reporting these items. The National Consumer Assistance Plan (NCAP) is an agreement among the three major credit bureaus not to report these items. These credit bureaus can change this policy at their whim. 

The credit bureaus do still report bankruptcies. The FCRA allows the credit bureaus to report both Chapter 7 and Chapter 13 bankruptcies for 10 years. But the three major bureaus have agreed to report Chapter 13 bankruptcies for only seven years. Similar to the NCAP, the credit bureaus can change the seven-year rule at their whim. 

The Credit Repair Organizations Act (CROA) prohibits a credit repair company from advising you to provide an alternative identification to a credit bureau or creditor in an attempt to hide negative credit information. If you try this yourself, you may be prosecuted for fraud.

How Long Does It Take To Repair Your Credit?

How long it takes to repair your credit depends on your situation and how many negative items are on your credit report. The credit bureaus have 30-45 days to investigate a dispute. After the investigation, the credit bureau has five business days to inform you of its results. If you have one or two errors that the creditors can quickly confirm, your credit dispute could be over in six weeks or less. The more issues you have on your credit report, the greater the chance you'll run into an uncooperative creditor, which can require multiple investigations. This will take more time, sometimes three to six months.

The credit repair process starts by sending a dispute letter. If you don’t have success with the dispute letter, it may be a good idea to contact a consumer attorney. A consumer attorney may be able to resolve the situation quickly. But, your case may require a lawsuit. If a lawsuit is needed, the process could take two to three years. That's the bad news. The good news is that some FCRA plaintiffs have recovered multi-million dollar verdicts. Depending on the circumstances of your case, you could be well compensated for the extra time it takes the judicial system to resolve your issues.

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What Is a Credit Repair Company?

Credit repair companies offer to improve your credit for a fee. These companies usually pull and review your credit reports from all the credit bureaus. Then they put together a plan to improve your credit score, which is sometimes called your FICO score. They file disputes with the credit bureaus for erroneous items and have debt collectors validate your debt. They may also send cease-and-desist letters to collection agencies. They may even attempt to negotiate pay-for-delete agreements with debt collectors to have accurate items removed from your credit report.

Credit repair companies may also advise you on how to improve your credit. In addition to telling you to pay your bills on time, they may advise that you apply for new credit and not use it. This will help increase your credit score because a big part of your score comes from having a low credit utilization ratio, meaning you only use 30% or less of the credit available to you.

A nonprofit credit counseling agency is usually a better solution than a credit repair organization. A credit counselor will provide credit education to help you understand how you can do your own credit repair. They'll also help you with budgeting and financial management, which are the foundations of long-term good credit. Having someone else "fix" your credit for you is often a short-term solution. Even worse, a credit repair organization charges fees, which can be very high. The money for these fees could be put toward paying down debt. A nonprofit credit counselor doesn't charge a fee for counseling.

Is it ever a good idea to hire a credit repair agency? Yes. It could be a good idea if you don’t have the time to fix the errors yourself, you have some cash to spare to pay the fees, and you can do research to find a trustworthy company. 

Signs of a Credit Repair Scam

Scams and fraud are common in the credit repair industry. The Federal Trade Commission (FTC) lists the following signs you may be dealing with a scam credit repair organization.

  • They demand you pay a fee upfront before they start working for you.

  • They tell you not to contact the credit bureaus yourself.

  • They tell you to dispute information on your credit report even though the information is accurate.

  • They tell you to give false information on applications for credit.

  • They don't explain your legal rights under the FCRA and the CROA but focus on saying what they can do for you.

As with any financial services company, you should do research before hiring anyone. Internet reviews may be the first place to look but should never be the last. Check the company’s rating with the Better Business Bureau (BBB). The BBB also has a scam tracker tool to search scams in your area. You should also check the CFPB's complaint database and your state's attorney general's office.

The Credit Repair Organizations Act (CROA)

The CROA was passed to address widespread scams in the credit repair industry and help clients make informed decisions when they hire credit repair organizations. Its other purpose is to protect the public from unfair and deceptive advertising and business practices by credit repair organizations. The CROA requires credit repair organizations to provide prospective clients with a disclosure statement titled "Consumer Credit File Rights Under State and Federal Law." 

The credit repair organization must also provide a written contract that includes the following:

  • Your legal rights and details of the credit repair services; 

  • Your three-day right to cancel the contract without any charge;

  • How long it'll take to get results;

  • The total cost you'll pay; and

  • Any guarantees the company is making.

The CROA prohibits credit repair organizations from certain behaviors.

  • They can't make misleading statements to a credit bureau or creditor. They also can't advise you to lie to a credit bureau or creditor.

  • They can't alter your identity or create a new identity to hide your negative credit information.

  • They can't make misleading statements about the credit restoration services they provide and the results they'll achieve for you. 

  • They can't engage in fraudulent activities.

Though it is illegal for a credit repair organization to charge or receive any money for the performing services before they fully perform the services is fully performed, some companies do ask for a sign-up fee. This is a legal gray area. Regardless, it’s a good idea to get the fee structure in writing as is required for the contract. Ask about any fee you think might violate this law. If you’re not satisfied with the explanation of the fee, consult with an attorney.

How Much Does Credit Repair Cost?

Each credit repair/restoration company has a different pricing structure. As mentioned above, credit repair companies are prohibited from charging upfront fees. Some charge a one-time flat fee after the services are performed or a monthly fee for services performed in the previous month. These monthly fees can run from $50 to $130 or more. Others charge a fee for each item they successfully delete from your credit report. Different credit repair companies charge different amounts for their services, which is why it’s good to research your options before choosing. The more they're charging, the greater the reason for being very careful when hiring such a company.

Can a Credit Repair Company Really Help?

It's important to realize there's nothing a credit repair company can do that you can't do for yourself. That being said, a person that handles credit repairs day in and day out may have become very good at it. The problem is finding a firm that charges a reasonable fee and has a good reputation may be difficult. Usually, your best bet is to work with a nonprofit credit counseling agency and let them advise you on how to handle credit disputes.

How To Repair Your Credit for Free

If your credit disputes aren't achieving the desired result, it may be time to contact a consumer attorney. An experienced consumer attorney can evaluate your case and determine if a lawsuit is necessary. This can also help speed up the dispute process since credit bureaus prefer to keep the lawsuits against them to a minimum.


You can learn a lot about credit repair techniques from the many credit repair books available and from information available online. But there's a lot of unreliable information on the web as well. The best source of information is a free consultation with a nonprofit credit counselor or consumer attorney.

Spotting errors on your report isn't difficult. Consider the following:

  • If your name is misspelled you know it. 

  • If you don't recognize an account, call the creditor and ask them about it. Your lender may have been bought by another company or your debt could have been sold to a debt buyer. This is where sending a validation letter to the creditor can be helpful. You have a right to send these debt validation letters under the Fair Debt Collection Practices Act (FDCPA).

  • An unrecognizable account is due to a mixed credit report or worse, identity theft. A mixed report happens when another person with a similar name or Social Security number has their information mixed with yours.

  • Check all your account balances to see if they're correct. Realize the balances won't be exactly the same, but they should be close to your last statement balance. If the balances don't match, you need to reconcile the difference.

  • Make sure your credit limits match those on your account statements. This may seem unimportant, but it can have a large impact on your credit score.

If you have a collection account you want to be removed from your credit report, you can try to negotiate a pay-for-delete agreement with the collection agency. You can use a goodwill letter to request a negative mark be removed by an original creditor. Do not try this with the credit bureaus. They won't do it. The creditor probably won't do it either, but it’s worth a try because having these items removed could substantially improve your credit report.

You may be tempted to close some accounts, but the closed accounts will still be reported even after you pay them off. Also, if you close the account, you reduce your available credit, which can increase your credit utilization ratio and hurt your credit score. Of course, if you want to remove the temptation of using all your available credit, it may be a good idea to close an account. It doesn't help your credit score at all to pay off an account and then run it back up to the limit.

Rebuild While Repairing

While you're trying to remove negative marks from your credit report, you need to also make positive efforts to improve your credit. It isn't going to help you if while you're getting negative marks taken off your credit report, you're still paying late. This results in adding new negative marks to replace the old negative marks. The same goes for maxing out your cards. This is another reason it's usually better to see a nonprofit credit counselor. They help you form better credit habits instead of just filing disputes for you.

Let’s Summarize…

It's a good idea to periodically review your credit report to see if you need to perform any credit repair/restoration. The FCRA gives you the right to a free credit report from each of the major credit bureaus once per year. You may be tempted to hire a credit repair/restoration company to do your work for you. Often, this isn't a good idea since most people can do this work themselves. You can save a lot of money doing it yourself, and if you need assistance, you can go to a nonprofit credit counseling agency and get help for free.

Yearly maintenance on your credit report along with good credit habits is the secret to good credit. Unless you’re one of the luckiest of people, you will suffer difficult financial circumstances at some point in your life. When this happens, your credit score will probably suffer. You may need help, and there are a lot of advertisements for companies itching to help you. It's usually best to ignore the advertisements and stick with the nonprofit credit counselors.

Written By:

Lawyer John Coble


John Coble has practiced as both a CPA and an attorney. John's legal specialties were tax law and bankruptcy law. Before starting his own firm, John worked for law offices, accounting firms, and one of America's largest banks. John handled almost 1,500 bankruptcy cases in the eig... read more about Lawyer John Coble

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