How Do Credit Repair Companies Work? [And Should You Use One?]

Credit repair companies offer to clean up your credit reports, for a price. Here’s what these services do and how to know whether you should consider working with one.

Young woman looking at her credit cards and bills
Updated May 13, 2024
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If you have bad credit, you may struggle to secure competitive insurance premiums or qualify for loans and credit cards — especially at lower interest rates. In some cases, the information found in your credit report could even hurt your chances of getting a job, particularly jobs at financial institutions and jobs requiring a security clearance

With so much on the line, it’s not surprising many people turn to credit repair companies to help them clean up their credit reports. These credit repair companies don’t do anything you couldn’t do yourself, but you may not have the time or knowledge to tackle your credit on your own.

If you want to decide to hire a company to help you with credit repair, it’s essential to understand how credit repair companies work before you sign any agreements.

In this article

What is a credit repair company?

A credit repair company is a third-party organization that seeks to get incorrect or negative information removed from your credit reports for a fee. These companies market themselves as being able to improve your credit.

Credit repair companies review your credit history for inaccurate information they can contest. The Fair Credit Reporting Act (FCRA), which is enforced by the Federal Trade Commission (FTC), makes it possible to dispute inaccurate information and have it removed from your credit reports.

Under the FCRA, credit bureaus are required by law to investigate a dispute and inform you of their findings within 30 days, unless the credit bureau deems your claim to be frivolous. If the credit bureau cannot prove the disputed information is correct, they must remove it.

Examples of frivolous claims are assertions with little or no supporting information and multiple claims filed at once without sufficient proof. Even if a credit bureau declares your dispute frivolous, it must still inform you of its decision within 30 days.

Generally, credit bureaus update the information in their credit reports once a month or within 45 days. Once the change is made, you might notice a difference in your credit score.

It’s important to note that the FCRA gives the right to dispute to all consumers, not just credit repair companies. This means you have the same ability as a company to repair your own credit — and not have to pay a fee.

Although some credit repair services are reputable, others are not. The FTC warns consumers to be wary of credit repair scams and thoroughly vet any company you’re considering hiring.

How do credit repair companies work?

Typically, credit repair services begin by requesting copies of your credit report from the three major credit reporting agencies — Equifax, Experian, and TransUnion. The company will usually look for inaccurate information or negative items that could be hurting your credit.

Here are some errors often found in credit reports:

  • Identity errors
  • Inaccurate account information
  • Accounts that aren’t yours
  • Duplicate accounts
  • Balance errors
  • Data management errors

After identifying items to target for removal, the company will create a plan for disputing these errors on your behalf. They will reach out to the credit bureaus or to the companies that reported the erroneous information to the bureaus. The goal is to get the credit bureaus or the company reporting the credit information to delete the harmful mark or modify it on behalf of the consumer.

If the credit repair service successfully removes even one derogatory mark — particularly if that mark is a serious one, such as a repossession or bankruptcy — it could potentially impact your credit. Individuals with high credit scores tend to have no or very few negative marks on their credit reports.

Many credit repair companies offer packages that include the various services they offer as part of their credit repair process, such as:

  • Credit monitoring: Credit repair companies may give you access to credit monitoring, often through Experian or another credit bureau. The primary purpose of credit monitoring is to alert you of potential fraud before it becomes a problem.
  • Credit score tracking: A common feature in credit repair packages, credit score tracking informs you of changes to your credit score and shows you how your credit has changed over time.
  • Score analysis: Companies typically provide a breakdown of the factors that are contributing to your credit scores, which could include your payment history, credit utilization ratio, and other variables.
  • Creditor interventions: Credit repair companies may offer to send what’s called a “goodwill intervention letter.” This letter aims to appeal to a creditor’s goodwill and ask the mark to be removed because you have an otherwise sterling payment record.

How much does credit repair cost?

According to the Credit Repair Organizations Act (CROA), a credit repair service may not charge an advance fee for services. As it stands, how these companies charge for their services and the amounts they charge vary widely.

When comparing credit repair companies, you may find some organizations charge a one-time fee for “first work.” For legal compliance, this fee must be charged after the company has begun work on your account. In contrast, others charge a per-item fee for each negative mark the company successfully gets removed from your credit report. Other companies offer packages and charge monthly for those service bundles. Some businesses charge $100 or more as a setup fee, with monthly fees up to $150.

One popular credit repair company, Credit Saint, has monthly fees ranging from $79.99 per month to $119.99 per month depending on the services provided. And that doesn't include its initial working fee. 

How to find a legitimate credit repair company

If you’re leaning toward outsourcing your credit repair to a third-party company, make sure to investigate its legitimacy before signing an agreement. Start by checking the company’s record of complaints with the Better Business Bureau and the Consumer Financial Protection Bureau. You can also perform a Google query of the company’s name, which often returns reviews by previous customers.

As you perform your due diligence on credit repair companies, the CFPB advises looking out for these five red flags for potential credit repair scams:

  1. Requests or demands upfront payments: The Credit Repair Organizations Act prohibits companies from seeking upfront payment. Organizations can request or receive money only after they complete the services they promise.
  2. Sounds too good to be true: Credit repair takes time, even when you’re trying to delete false information. Think twice before working with a company that claims it can repair your credit in short order, guarantees results, or promises a specific credit score.
  3. Can’t answer questions: Be wary of companies that can’t answer simple questions or provide details about their services. Ask a few questions to get a sense of whether you’re speaking with a legitimate organization.
  4. Provides misinformation and isn’t forthcoming: Scam outfits sometimes tell their customers not to contact the credit bureaus because only they can do that. That’s misinformation and a solid indication to walk away. A legit company should also inform you of your legal rights. For example, it should inform you of your right to a written contract containing the details of your arrangement and your right to cancel your contract within three business days.
  5. Asks you to misrepresent information: Run, don’t walk, from any company that advises you to create a “new” credit identity to obtain a new credit report.

How to repair your own credit

You have the right and ability to repair your own credit. Here is a simple process to clean up your credit:

  1. Pull your free credit reports. You are legally entitled to a free annual credit report from the major credit bureaus — Experian, Equifax, and TransUnion. You can apply to get these reports at
  2. Examine your credit reports. Learn how to read a credit report and verify that it contains accurate information. Look for mistakes or inaccuracies with your personal information, account information, and any collections.
  3. Dispute incorrect information. Credit repair boils down to challenging incorrect information and removing the errors from your credit report. You can learn the best practices for how this works in our guide on how to dispute credit report errors.

The CFPB provides sample templates to contest errors with the credit bureaus or to file dispute letters with information furnishers, such as creditors and debt collectors.


Is it worth paying someone to fix your credit?

It might be worth hiring a credit repair company to dispute inaccurate information on your credit report if you have poor credit and don’t have the time to do it yourself. Otherwise, if you have the time, you could save a tidy chunk of change just by filing free credit report disputes on your own.

How long does credit repair take?

FCRA law requires credit bureaus to investigate a credit dispute and notify you of their findings within 30 days. If your dispute is successful, the mark should be deleted from your credit report, within 30 days. Remember, whether you or a credit repair agency disputes the marks on your credit, results are never guaranteed.

Can you charge upfront fees for credit repair?

The Credit Repair Organizations Act prohibits credit repair companies from charging an upfront fee for services. Companies can request or receive payment only once the promised work has been completed.

Bottom line

Paying for credit repair could be a waste of money for some people because credit repair companies don’t do anything you couldn’t do yourself. That said, it could be right for those who would rather have a business handle the disputes for them. If you decide to work with a third-party company, make sure you do your due diligence to find the best company.

Alternatively, you might investigate a credit counseling agency instead. These are typically nonprofit companies that connect you with a credit counselor and provide a free consultation to get you started.

And whether it's you or a hired credit repair business working to correct your credit report, now is a good time to learn more about how to manage your money and avoid more credit issues in the future. Best practices for a better credit score include avoiding late payments to any lenders or creditors, keeping your credit balances below 30% of the available credit limit, and being mindful not to rack up too many hard inquiries at once.

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Author Details

Tim Maxwell

Tim Maxwell is a freelance financial writer whose work has been published on websites such as USA Today, Fox Business, Bankrate, Incomist, FinanceBuzz, and more.