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LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.

What is Credit Repair and How Does It Work?

Updated on:
Content was accurate at the time of publication.

Having a good credit score is essential for getting approved for credit cards, securing mortgages and even landing job opportunities. If you’re struggling with bad credit, you may be wondering how you can rebuild your credit.

Credit repair companies work on your behalf to improve your credit score by removing inaccuracies from your report in exchange for a fee. But these services are not a cure-all solution, and you can work to improve your own credit without hiring a third-party company. Read on to learn about credit repair services and other options you have for cleaning up your credit.

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What is credit repair?

With bad credit, you may struggle to get your own apartment, buy a home, or finance a car, for example — and that’s just the beginning. If your credit has been damaged due to late payments, debts in collections, or neglect, credit repair may help you get back on your feet.

You can work to improve your credit yourself or hire a firm to help. A good credit repair company can work as your advocate, educating you about your credit score and how it’s determined. Credit repair companies also work to improve your credit on your behalf, usually by negotiating with creditors and credit bureaus to remove negative marks, resolve issues and help you repair your credit — once and for all.

Credit Repair Organizations Act

Credit repair companies are governed by the Credit Repair Organizations Act. This law requires credit repair companies to take certain steps, including informing you of your legal rights, giving you three full days to cancel your contract and letting you know the full costs of their services upfront.

The law also gives you options if a credit repair company doesn’t live up to its promises, including the ability to sue them in federal court, the ability to seek punitive damages, and the right to join a class action lawsuit against the company.

  Learn more about checking your credit score for free on LendingTree.


How do credit repair companies work?

While credit repair companies don’t do anything you can’t do yourself, they do play an important role for people who feel overwhelmed by trying to fix their credit themselves. There are legitimate reasons consumers may turn to a credit repair company, including getting fraudulent accounts removed from their credit report, amending mismerged credit accounts that belong to someone else and misreported bankruptcies.

Legitimate credit repair providers assist consumers by reviewing the consumer’s credit reports, identifying information that is adverse to the consumer, interviewing the consumer and obtaining documents from the consumer to determine whether any of the derogatory information is false. From there, they typically prepare a letter to the credit bureaus disputing the errors. The dispute letter should identify the errors with specificity, briefly explain why the disputed information is false or misleading and state what the credit report should say instead.

Some of the steps credit repair companies can take on your behalf include:

  • Getting a copy of your credit report from the three credit reporting agencies: Experian, Equifax, and TransUnion
  • Reviewing your credit report to identify problems and the best course of action to fix them
  • Helping you use federal consumer protection laws to protect you and your credit from unfair debt collection practices
  • Analyzing your credit score and educating you on how to improve it
  • Negotiating with your creditors on your behalf
  • Disputing inaccurate information on your credit report and working to have it removed
  • Working to fix incorrect credit limits that can inflate or skew credit utilization and adversely your credit score

What to know before hiring a credit repair company

While having a third-party company handle your credit issues may sound ideal, it’s important to keep your expectations in check. Credit repair companies can absolutely help you improve your credit score over time, but they do have limitations.

Credit repair companies can’t do anything you can’t do yourself.

While credit repair agencies will work with your creditors and credit bureaus to improve your credit and have negative information removed, you can take all of these steps yourself without paying for credit repair.

You can also call your lenders and negotiate with them yourself. You do not need a credit repair firm for that. In fact, many lenders may not even allow a third party to negotiate on the customer’s behalf.

Accurate information can’t be removed from your credit report.

While credit repair companies may work hard to get your credit report cleared of any inaccurate information, they cannot get negative yet accurate information removed from your report. They also cannot promise to have information removed from your reports.

  Read more about where to get the best free credit reports.

Credit repair companies may not offer budgeting or money management advice.

While credit repair agencies aim to get you out of debt and repair your credit, they don’t offer the same services as credit counseling agencies.

Credit counseling agencies offer a more holistic approach to solving your money and credit problems, focusing most of their efforts on helping you make a budget, manage your money better and reduce spending.

On the flip side, however, credit counseling services don’t take the same steps to boost your credit score or fix negative marks on your credit report as credit repair agencies do. Before you choose one service over the other, it helps to educate yourself on both options.

  Read more about whether credit counseling services could be right for you.

You can cancel your contract within three days without penalty.

If you experience buyer’s remorse about purchasing the services of a credit repair company, according to the Federal Trade Commission (FTC), you have the right to terminate your contract within three days without paying any fees or penalties.

It will take time for your credit to improve.

Whether you do it yourself or hire a credit repair company, improving your credit isn’t an overnight fix.

Credit bureaus have 30 days to investigate an error and five business days to update you on the results of the investigation. In some cases, it can take even longer. For instance, if you’ve just received a new copy of your credit report then file a dispute, credit bureaus have 45 days to investigate. Patience and perseverance are key during this process.

  See more about how credit counseling services affect your credit score.


How to choose the best credit repair company

If you don’t have time to work on your credit yourself and have the extra funds to hire a credit repair company, here’s what you need to consider before signing a costly contract.

Research any regulatory action

If a credit repair company has a history of violating federal laws, you may want to be wary of doing business with it.

Since regulatory action and lawsuits are public record, you can find that information on government websites such as the FTC and the CFPB. In fact, the CFPB even has a complaint database you can search specific companies for.

Check for Credit Repair Organizations Act violations

All credit repair companies must comply with the Credit Repair Organizations Act. This means you’ll want to check that any credit repair companies you’re interested in follow these guidelines:

  • Can’t provide misleading information
  • Can’t require advance payment
  • Must provide contracts in writing
  • Offers consumers the right to cancel their contract

If you spot any potential compliance issues, it may be best to steer clear of that company.

Compare plans for features and fees

Like with taking out a personal loan or credit card, it’s important to shop around and compare credit repair companies for pricing and fees. Most credit repair companies offer tiered plans that come with various features and benefits. Generally, credit repair companies will charge a one-time set-up fee as well as a monthly fee you’ll pay for the entirety of the process.

However, keep in mind that repairing your credit, contacting your creditors and disputing errors on your credit report are completely free if you choose to do so on your own.

How to repair your credit yourself

Credit repair can be done by yourself without incurring any extra costs or hiring a company. You may freely dispute any errors on your credit report, according to the Fair Credit Reporting Act (FCRA). Credit bureaus have 30 days (sometimes 45 days) to investigate any inaccurate information you dispute.

You can get a free copy of your credit report from all three agencies online for free from instead of relying on a credit repair company to pull your credit reports for you. It’s important to check reports from all three credit bureaus — Equifax, Experian and TransUnion — as they may differ. If you find any inaccuracies, you can challenge the error online, by phone or online with the individual credit union.

You can also take other steps to improve your credit on your own, including paying down delinquent debts, making all of your payments on time and lowering your utilization by paying down the amounts you owe.

Ready to start paying down debt with a debt consolidation loan?

Credit repair vs. debt settlement vs. credit counseling

If your credit score is struggling, there are alternative routes you can take other than credit repair, such as debt settlement and credit counseling. However, there are important distinctions to keep in mind when weighing your options as each can impact your credit differently.

Credit repairDebt settlementCredit counseling
Typically charge a set-up fee and monthly service feesFees can be as high as 60% of your total debtMay charge small service fee, but costs are typically low or even free
In order to improve your credit score, credit repair companies can help to remove inaccurate information on your credit report by contacting credit bureaus and creditors for you. Some companies may also offer credit monitoring services and personal finance advice.Debt settlement companies can work with your creditors to negotiate your current debts to a lower amount. However, debt settlement can show up on your credit report for up to seven years and can have a negative impact on your credit score.When you enroll in credit counseling, you’ll work one on one with a personal finance professional who can help you enroll in a debt management plan, negotiate with creditors on your behalf and help you improve your credit score over time.

Credit repair scam warning signs

Unfortunately, there are numerous credit repair scams. In these cases, you could damage your credit score even more, dig yourself into a financial hole or even find yourself in legal hot water.

Asks for upfront fees: If a company is asking for money before it performs any services, that may be a red flag. According to the Credit Repair Organizations Act, a credit repair company can’t require payment until it has fulfilled its end of the bargain, though some companies instead use monthly payment plans.

Guarantees it can remove negative accurate information: As long as the information on your credit report is accurate and up to date, a credit repair company will not be able to remove information from it, even if it’s negative. If a company advises you to dispute the information on your credit report regardless of its accuracy, it may be a scam.

Doesn’t explain your rights: According to the Fair Credit Reporting Act, consumers can dispute information on their credit reports themselves. You don’t need a credit repair company for that. If a company doesn’t make this clear to you, you may want to go in a different direction.

Instructs you not to contact credit bureaus: As a consumer, you can contact the credit bureaus and advocate for yourself. A credit repair company that tells you otherwise may be worth avoiding.

Promises new credit identity: Any time a company promises you a “new credit identity” or asks you to give false information, run the other way. According to the FTC, this activity is illegal.

Credit repair can help consumers boost their credit scores and move on from credit problems from their past. In that respect, credit repair can work for anyone if you give it enough time.

For the process to work, however, you need to work in collaboration with your credit repair agency to make needed changes, such as paying down debt and paying your bills on time.

How long it takes to repair your credit depends on a wide range of factors, including your current credit score, the severity of your credit issues and the amount of debt you have to pay off.

If you want to get a general idea of how long it will take for credit repair to work, your best bet is to speak with a knowledgeable credit repair agency or credit counselor to see what steps they need to take and a general timeline for their services.

While credit repair agencies may not be able to tell you exactly how long it will take to repair your score, their experience in this field may put them in a position to give you a general idea.

Since the Credit Repair Organizations Act (CROA) oversees credit repair agencies and sets rules to govern what they can and can’t do, you have rights when it comes to credit repair.

According to the CROA, credit repair companies must explain your legal rights in a written contract along with details of the services they’ll perform. They must also inform you of your three-day right to cancel without charge, and let you know approximately how long their services will take.

Last but not least, credit repair agencies must inform you of the total cost of their services in writing. If a credit repair agency doesn’t offer this information, you should steer clear of them altogether.

Yes. While credit repair companies can take care of the bulk of your credit repair for you, they can’t do anything you can’t do yourself.

The FTC offers a multi-step process to repair your credit on your own. Not only do they suggest ordering a copy of your credit report for free, but they also suggest disputing errors on your reports directly with the credit reporting agencies.

Other steps you can take to improve your credit include paying all your bills on time (perhaps setting up payment reminders to expedite this) and lowering the total amount of debt you have. Paying off any late or delinquent debts will also help boost your score.

Checking your credit score won’t have a negative impact. The only time your credit score may be impacted by a credit check is if a lender (with your permission) runs a hard credit pull if you apply for a form of credit. Even then, the impact is typically small with your credit score only going down by five points or less.

Negative information — such as debt settlement, late payments or Chapter 13 bankruptcy — can remain on your report for up to seven years.

However, other types of negative information — such as Chapter 7 bankruptcy or tax liens — can stay on your credit report for up to 10 years.

If you suspect a credit repair scam, you can report it on the FTC website, contact your state attorney general or reach out to your local consumer affairs office. You can also call the FTC help line at 1-877-FTC-HELP.

If you’re struggling with debt and the effects of poor credit, working with a credit counseling agency can help.

These agencies, which are normally nonprofit and low cost, work with you to manage your debts and stick to a monthly budget. They also discuss your entire financial situation with you in an effort to pinpoint the personal struggles you have with money along with potential solutions.

To find a reputable credit counseling agency, you can find a list on the Department of Justice website.

Your credit score is calculated using several factors, most importantly your payment history and how much money you owe.

In fact, your payment history makes up 35 percent of your FICO Score and your credit utilization (amount of debt you owe compared to your credit limits) makes up another 30 percent.

Other factors impacting your credit score include the length of your credit history, the amount of new credit you have and the mix of different types of credit you carry.

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