When it comes to repairing your credit scores, you have two options: you can DIY or hire professional help. Hiring someone to handle the details for you may seem like the best option at first, but there is a lot to consider before you decide.

What Is a Credit Repair Company?

A credit repair company, also called a credit repair organization, is a business you can hire to help improve your credit. Generally speaking, credit repair companies communicate on your behalf with credit bureaus or other companies that have reported your credit information. The purpose of a credit repair company is to help dispute or remove negative information from your report. Some credit repair companies may offer credit counseling services as well, but they should not be confused with nonprofit credit counseling.

Alternatively, you can seek out nonprofit credit counseling. Nonprofits often seek to help you improve your financial situation, rather than focus on your credit report alone.

All credit repair companies must comply with the federal Credit Repair Organizations Act, which mandates how they must operate. Many states have placed guidelines on credit repair organizations as well. However, before you sign up, you’ll want to know the organization you choose is complying with those regulations, has your best interest in mind, and can provide helpful services. Generally, nonprofits are not regulated by the Credit Repair Organizations Act (CROA).

What Can Credit Repair Companies Promise?

Credit repair companies may make big claims about what they can and can’t do for you. Here’s what they can actually promise to do:

  • Help you understand your credit report. The first thing a credit repair company will do is pull your credit report from the major credit bureaus to look for any errors, such as inaccurate inquiries and duplicate accounts. The credit repair organization can then show you what may be hurting your credit and discuss whether anything can be disputed and possibly removed.
  • Dispute any discrepancies on your credit report. If the credit repair organization finds anything that needs to be disputed, it can handle this for you. By submitting a dispute, the credit repair organization is requesting that the credit bureau review the information to verify its accuracy. If the information is inaccurate, it should be corrected or removed.
  • Suggest ways to improve your credit. Whether you have information to dispute or not, a credit repair organization may offer advice to help you improve your credit. This is known as credit counseling.

What Can’t They Promise?

A common misconception is that credit repair companies can remove any negative information from your credit report, even if the information is true. According to federal law, “neither you nor any ‘credit repair’ company or credit repair organization has the right to have accurate, current, and verifiable information removed from your credit report.” Accurate, negative information including late payments, collection accounts, and charge-offs can remain on your credit report for seven years. Chapter 13 bankruptcies remain for seven years while Chapter 7 bankruptcies remain for 10 years.

If a credit repair organization promises you that it can have any information removed from your report, even if it’s accurate, then you may want to steer clear of that organization.

When Is It OK for a Credit Repair Company to Ask for Payment?

Under the federal Credit Repair Organizations Act, a credit repair organization cannot ask for or receive payment before it has completed the services detailed in your contract. Most companies will charge a monthly fee; however, they are not allowed to begin collecting payment until services are completed and you have been provided a written contract. You should know that it is illegal for a credit repair organization to receive any upfront payments — including a payment plan.

How to Find a Good Credit Repair Company

The Consumer Financial Protection Bureau has some great advice for finding a reputable credit repair company.

Some things you should look for:

  • Ask the company what services it offers. Any promises to remove negative credit information, even if it’s accurate, is a sign that it’s not a good company to use.
  • Make sure the company gives you a written contract that explains its services and your legal rights. Giving you a written contract that includes these terms and conditions—including how to cancel your contract — is required by law. You have three business days to cancel if you change your mind.
  • Ask the company about its payment structure. The organization should let you know that it can accept payment only after the services that it’s providing are completed. Keep in mind, completing a service may happen before the resolution of a dispute. For example, if you pay to have disputes filed on your behalf, the company may charge you after it files the dispute, even if it’s still pending.

Before choosing your credit repair company or credit counselor, you can also:

  • Review the list of approved credit counseling agencies provided by the United States Department of Justice.
  • Check with the Better Business Bureau (BBB).
  • Look up and read reviews for that company or person through consumer review sites like Yelp. Keep in mind that some companies may pay for positive reviews on blogs and other websites.

Be Wary of Misinformation

Understanding what misinformation is out there can help you separate a reputable company from a questionable one. If you see any of the following claims, there’s a good chance that the person or company telling it to you is running a credit repair scam:

“We can get rid of any negative credit information!”

If the information on your credit report is accurate, there is no company out there that can get rid of it for you. You should also be wary if the company promises you a specific result or increase in your credit score.

“All you need to do is make a new identity.”

You shouldn’t trust a company that suggests that the best way to repair your credit is to get a new credit identity. If it suggests that you apply for an Employer Identification Number instead of using your Social Security number, it’s actually trying to create an entirely new credit report for you. This will not repair your credit.

“Only we can fix this.”

You should know that under the Credit Repair Organizations Act, you have the legal right to dispute any errors on your credit report yourself. You do not need to hire any person or company to do this for you.


The DIY Path

All three major credit bureaus have built online access tools that allow you review your credit report and, if found, dispute any inaccuracies on your credit report. Even better, we have created the Ultimate Guide to the Credit Repair Process to put all of the information you need right at your fingertips, giving you the power to handle the process yourself, for free!


Nonprofit Credit Counseling

As an alternative to credit repair organizations, you may want to seek out a nonprofit.

Some nonprofit credit counselling services assist consumers with disputes, debt counselling, and other financial advice. While they aren’t legally “credit repair organizations,” they can often perform some of those functions. If you’re looking for help because you’ve found yourself in debt or you need advice on how to manage your finances, a nonprofit credit counseling company can offer you assistance in many different ways.

Credit counselors can help you figure out your entire financial picture, including your income, monthly and yearly expenses, and more. These professionals can work with you to create plans to manage your debt and may even be able to speak with your loan issuers to help you explore your repayment options. If you’re considering filing for bankruptcy, a credit counselor can help you with that process as well.

A nonprofit credit counseling company can also help you focus on your entire financial picture. This includes helping you understand how to build better credit moving forward.

Nonprofit credit counseling companies may charge a fee. However, they can work with you on a payment structure that works best for your financial situation. In addition, nonprofit companies typically offer lower costs overall and may even be free in some cases, such as if you have a lower income.

The content provided on Elevate.com is for educational and informational purposes only and does not constitute financial or legal advice. It is not intended as a substitute for professional advice. Elevate is not acting as a credit counseling or repair service, debt consolidation service, or credit services organization in providing this content. Elevate makes no representations about the reliability or suitability of the information provided – any action you take based on this content is at your own risk.