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From the Experts at Credit.com

The Truth About Credit Repair & Credit Repair Companies

by Gerri Detweiler

Credit repair companies promise, for a fee, to clean up your credit report so you can get a car loan, a mortgage, or even a job. But can they deliver?

“Credit problems? No problem!”

“We can erase your bad credit — 100% guaranteed.”

“Create a new credit identity — legally.”

“We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!”

If your credit is really bad, these kinds of advertisements can be very appealing. That’s especially true if you want to buy a home, finance a car or are just tired of dealing with bad credit.
The problem is that it’s very hard for most consumers to really understand what credit repair can and cannot do, as well as whether the company they are considering is legitimate. These companies promise, for a fee, to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job. Some credit repair companies are outright scams. Their goal is to “help” their clients by whatever means necessary, whether they are legal or not. They have no problem breaking the law, and they may use tactics such as:

  • File Segregation: Consumers are told to apply to the IRS for an Employer Identification Number (“EIN”) and then use the EIN in lieu of their Social Security number when applying for credit, in order to create a completely new credit file in which the old debts will not appear. The scheme essentially involves an attempt to hide one’s identity from creditors by getting credit with the EIN and a name and address that differ slightly from accurate identifiers. It is illegal.
  • Identity Theft: Knowingly or not, a consumer applies for credit using someone else’s information that has been stolen. Another variation is to report accurate unpaid debt as “fraud” in order to avoid paying it. To do this, the consumer will have to fill out a police report and lie. This too is illegal.

Most credit repair companies, however, are not using illegal tactics. And many of them genuinely want to help their clients improve their credit. How do they try to do that? Generally, there are three steps to the service that these credit repair organizations offer:

  1. The companies ask you to forward them copies of your credit reports (usually from the three major credit reporting agencies – Equifax, Experian, and TransUnion), which you must obtain directly from those agencies;
  2. The credit repair organizations then recommend which items on your credit report you should dispute;
  3. The credit repair organizations then contact the credit reporting agencies to challenge questionable items on your credit reports.

Credit reporting agencies are obligated under the Fair Credit Reporting Act (FCRA) to correct or delete inaccurate, incomplete, or unverifiable information, usually within 30 days. They are not required to remove accurate information unless it is more than seven years old (or bankruptcies that are over ten years old). If the information that is challenged it’s confirmed, it will be removed. And that’s what these companies are often doing – writing and sending dispute letters on their client’s behalf.

But here’s the thing: you have the right to dispute any inaccurate or incomplete information on your credit report yourself – and the credit reporting agency must investigate the dispute without charge to you.

Why Do Consumers Use Credit Repair?

So why do consumers use credit repair? Usually one (or more) of three reasons:

  1. They believe credit repair companies have methods for getting rid of information that are known only to them;
  2. There are mistakes on their credit reports that they are unable to fix themselves;
  3. They are overwhelmed and just want someone to take care of it for them.

If you are considering using one of these firms because you think they have some kind of “secret sauce,” that you may be wasting your money. There is nothing they can legally do that you can’t do yourself. You can get your own credit reports for free once a year, and you can dispute negative information yourself. If the information is not verified at the source, it will be removed. Sometimes that works, and sometimes it doesn’t. There’s no magic language you have to use (in fact it’s better if you don’t try to quote consumer protection laws – that’s usually a tip off that you are trying to use credit repair) and all it cost you is a stamp.If the reason you want to hire one of these companies is because there are mistakes on your credit reports that you haven’t been able to fix, then you may want to first try filing a complaint with the Consumer Financial Protection Bureau. They will usually contact the credit reporting agency on your behalf, for free. (Note – if you have not disputed the information with the credit reporting agency that is reporting it, do not file a complaint with the CFPB. You should first dispute it yourself. Here’s a guide that explains how to dispute credit report mistakes.) And if that doesn’t work, you may want to consider consulting a consumer law attorney with experience in credit damage cases. If you have a good case, you may be entitled to damages.

However, if you don’t feel you have the time to do this on your own, if you are are overwhelmed by the process, or if you just want to turn the whole thing over to professionals, there are some basic rules for picking a reputable company to assist you in repairing your credit.

According to the FTC, the main warning signs of scam credit repair companies are:

  • Companies that want you to pay for credit repair services before they provide any services. Credit repair companies cannot require you to pay until they have completed the services they have promised.
  • Companies that do not tell you your legal rights and what you can do for yourself for free.
  • Companies that recommend that you not contact a credit reporting company directly.
  • Companies that advise you to dispute accurate information in your credit report or take any action that seems illegal, like creating a new credit identity. If you follow illegal advice and commit fraud, you may be subject to prosecution.

In 1996, the Credit Repair Organizations Act (CROA) was signed into law to protect the public from unfair or deceptive advertising and business practices by credit repair organizations. By law, credit repair organizations must give you a copy of the “Consumer Credit File Rights Under State and Federal Law ” before you sign a contract. They also must give you a written contract that spells out your rights and obligations. Read these documents before you sign anything.

The law contains specific protections for you. For example, a credit repair company cannot:

  • Make false claims about their services.
  • Charge you until they have completed the promised services.
  • Perform any services until they have your signature on a written contract and have completed a three-day waiting period. During this time, you can cancel the contract without paying any fees.

Your contract must specify:

  • The payment terms for services, including their total cost.
  • A detailed description of the services to be performed.
  • How long it will take to achieve the results.
  • Any guarantees they offer.
  • The company’s name and business address.

Free Help With Your Credit

Before you spend money on one of these services, you may want to try to fix your credit yourself. That’s especially true if the fees that one of these companies will charge you is money you really can’t afford and you’d be better off using it to pay other debts, or toward a down payment on a house or a car.

You can check your credit score each month using Credit.com’s free Credit Report Card. This completely free tool will break down your credit score into sections and give you a grade for each. You’ll see, for example, how your payment history, debt and other factors affect your score, and you’ll get recommendations for steps you may want to consider to address problems. In addition, you’ll also find credit offers from lenders who may be willing to offer you credit. Checking your own credit reports and scores does not affect your credit score in any way.

Is there something on your credit that you don’t understand? Use the search box on Credit.com to find an article on that topic. You’ll find dozens of stories about specific credit report topics such as inquiries, collection accounts, and how late payments affect your credit. If you still don’t understand the topic after reading those articles, you can leave a comment. Our experts frequently answer questions on the blog.

There is a lot you can do to make your credit stronger on your own. If you still need help, then you’ll at least go into the credit repair process understanding what you are paying for.

The information in this article was updated on October 20th, 2014.


  • http://www.Credit.com/ Gerri Detweiler

    I am not opposed to credit repair conceptually, but I have a hard time recommending most (not all) paid credit repair options. Most of the time the consumers I hear from don’t understand that what they are really paying for is for a company to do the work for them (or what that work really entails – which is often form letters). Instead they either believe (or are led to believe) that these companies can do things they can’t do themselves, including somehow remove all seriously negative information regardless of accuracy and/or increase their scores dramatically in a short period of time whether that’s true or not.

    I understand that sometimes consumers need help or guidance, and if they truly understand what they are getting into when they purchase credit repair, then that’s one thing. But I hear from consumers who believe that for the right price – sometimes thousands of dollars – their bad credit can go away quickly. I just spoke with someone in that situation last week who was about to spend $2800 she really couldn’t afford.

    When those consumers would be better off using that money to resolve debt or even to build savings to avoid future credit problems, then that’s when I think they need to weigh their options. And if teaching them what they can do on their own for free is self serving then I admit to being guilty as charged!

    • Imnutss

      All i have to say is watch out for Best Credit Repairman in NJ, the guy will take your money and disappear not return your calls, letters anything but he will keep an eye on your credit and once you get fed up chasing him and end up fixing your credit report yourself he will sue you for more money. The contract says he will get you to a certain score within 180 days but BCR doesn’t provide any proof of that score or anything, they just sue you and even the lawyer James Mayer that represents BCR is involved in the scam as his firm will forge your signatures in court papers to make it look like he is notifying you but they don’t contact you for over a year and than make up lies like you wont believe to win the judgement based on technicality that the customer had enough time to respond to the judgement but how can anyone respond to something they don’t even know about. i bought cars etc after i had the judgement but no one told me about it. i found out when I had to rent a house that there was a judgement. by the time i filed a motion to vacate (with HARD EVIDENCE) it was too late and the judge said i should have done something earlier and denied the motion, so basically BCR and James Mayer win the award for most organized criminals in the state of NJ! to add insult to injury i had to pay another $1000 to get rid of these guys and when i went to James Mayer’s office some guy gregory came out and i swear i initially thought he was a homeless person from the way he was wearing filthy clothes and smelled. (no lie) his office was a chop shop not a real lawyers office. so please be careful if you want to fix your credit you can simply go to experian or the others site and dispute info in minutes right online. Dont ever fall for credit repair companies.

  • fuzzy77

    I understand the warning, but they stereotype agencies into one bad clump. Fact: I have gone through Lexington Law and Allen Michael. I have used both for 4 yrs. Allen Michael was 1st and got 12 negatives off my 3 reports. Lexington Law has gotten a total of 14 off . I have a total of 11 left spread across 3 reports. I may not be typical, but after being SCREWED by banks and defrauded by a Mortgage Broker, I have no issue if a creditor can not verify accuracy even for a debt I did have. It is their stupid game and I am going to play it legally and take full advantage of loopholes. After the fraud that forced a bankruptcy I went from a 740 to a 525…4 years later my mean FICO (not credit) score is a 667 and I was able to get a new CC and an auto loan and just qualified for a mortgage at 4.3% 30yr fixed.

  • heavyw8t

    The truth is that anything these people can do for you, you can do yourself. If your credit report is filled with legitimate bad entries, they can’t be removed until their longevity runs out. Some things will stay on your credit for as long as 7 to 10 years, and nobody can remove them. Legitimate black marks are just going to be there. All these agencies do for you is remove things you could do if you just do some leg work and write some letters.

  • jowannapeterso

    Who did you hire? Were they any good?

  • heavyw8t

    It is the missed payments that are on your credit report. Whether you have since paid them in full or not, you missed payments. That is what is on your account for 7 years. As time passes those negatives will lose weight. The part of your post that caught my eye was “When I was notified of the debt”. You did not know you had student loan debt before being notified of it? I don’t grasp how it could be that you went to college and didn’t know you were getting student loans to pay for it.

    • Jeff

      The person didn’t state he/she didn’t know, the statement was ‘went away’.

      • heavyw8t

        Doesn’t “When I was notified of the debt” intimate that the person didn’t know of the debt?

  • Nancy Miller

    you are lucky, I have been sued because they the law firm legal helper /credit advocate law firm neglected to settle a summed account . After paying $15,000 dollars most up front fess that is illegal. they settle a citi group account which is a wolters Kluwer . scamm


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  • Meet Our Expert

    gerri_detweiler GravatarGerri Detweiler is Credit.com's Director of Consumer Education. She focuses on helping people understand their credit and debt, and writes about those issues, as well as financial legislation, budgeting, debt recovery and savings strategies. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of TalkCreditRadio.com.
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