How credit repair companies work: your rights, red flags and the free alternative

What do credit repair companies actually do?

Mostly they dispute items on your credit reports with the bureaus and lenders. The FTC says you can do anything they do legally for little or no cost.

The CFPB describes them as for-profit businesses that promise to improve your credit, usually by disputing items on your credit reports ^[2]. Experian says some also monitor your reports and alert you to new negative information ^[17]. The FTC's view is blunt: anything a credit repair company can do legally, you can do for yourself for little or no cost ^[3].

What they can legally work on is information that's wrong. The CFPB says credit repair companies cannot legally get information removed if it is accurate and timely ^[2].

What rights do I have under the Credit Repair Organizations Act?

You get a rights statement before signing, a written contract, three business days to cancel, and no charge until the service is fully performed.

• Before any contract is signed, the company has to hand you a separate written statement called "Consumer Credit File Rights Under State and Federal Law" ^[4].
• The contract must be written and dated. It lists the total of all payments, describes the services in detail, gives an estimated completion date or how long the work will take, and shows the company's name and business address ^[5]. No services can start until you've signed it and the three-business-day period has ended ^[5].
• You can cancel without penalty before midnight of the third business day after you sign. The contract has to come with a "Notice of Cancellation" form, and you get copies of the contract and anything else you sign ^[6].
• The company can't charge or take money for a service before that service is fully performed ^[1].
• It can't make untrue or misleading claims about its services, advise you to make misleading statements about your credit to bureaus or lenders, or deceive anyone in selling its services ^[1].

You can't sign these rights away. Any waiver is void, and asking you for one is itself a violation ^[7]. If a company breaks the law, you can sue for the greater of your actual losses or what you paid it, plus any punitive damages the court allows and reasonable attorney's fees ^[8]. This is a summary of the statute, not legal advice.

What does the Telemarketing Sales Rule add?

If you were sold by phone, the company can't take payment until its promised time frame ends and a credit report from six months after the results shows them.

The rule bars asking for or taking any fee for services sold as improving your credit history or rating until two things happen. The time frame the seller promised has to run out, and the seller has to give you a consumer report showing the promised results, issued more than six months after those results were achieved ^[9].

The CFPB says that means a company that signs you up by telemarketing can't charge an upfront fee or an ongoing monthly service fee, even one it calls a "subscription fee" ^[2].

What are the red flags of a credit repair scam?

Being asked to pay before any work is done is the big one. So is a promise to get accurate information off your report or to hit a set score.

• Payment before the work. The CFPB says all forms of upfront payment before services are completed are illegal, and that some companies set up monthly payment plans to try to get around the rule ^[10].
• Promises to get accurate, current negative information off your report quickly, or a promised score increase ^[10][11].
• Advice to dispute everything on your report, including information that's correct and timely ^[10].
• Being told not to contact the credit bureaus yourself ^[3][10].
• Vague answers about what the company will do and what it costs in total, or silence about your rights ^[3][11].
• Any suggestion that you lie on a credit application, file a false identity theft report, or use an Employer Identification Number in place of your Social Security number ^[3][11].

What can't a credit repair company do?

It can't get accurate, timely negative information taken off your report. Only errors can be corrected, and you can dispute those yourself for free.

The CFPB says credit repair companies cannot legally get accurate and timely information removed ^[2], and the FTC says companies that make these promises can't remove true information ^[3]. The FTC adds that most negative information stays on your report for seven years and bankruptcy for 10 ^[3]. Each item's timeline is in how long negative items stay.

How do I dispute credit report errors myself?

Get your free reports, then write to the bureau and to the company that reported the error. It's a free right under the Fair Credit Reporting Act.

The CFPB calls disputing errors a free legal right under the Fair Credit Reporting Act ^[10]. Pull your reports from AnnualCreditReport.com and dispute errors directly with the nationwide credit reporting companies, online or by letter ^[11]. The bureau and the business that supplied the information both have to help correct anything inaccurate or incomplete ^[3].

Our dispute guide covers what to send, the deadlines and each bureau's dispute channels.

How is credit counseling different from debt settlement and credit repair companies?

Credit counselors are usually nonprofits that help you manage debt. Debt settlement firms negotiate lump-sum payoffs. Credit repair companies dispute report items.

Counselors can't erase your debts ^[2]. The CFPB warns that stopping payments while a settlement is negotiated can bring more fees, interest and collection efforts, and that forgiven debt can create a tax bill ^[2].

How do I report a credit repair company?

File a complaint with the CFPB, report it to the FTC at ReportFraud.ftc.gov, and contact your state attorney general or consumer protection office.

The CFPB takes complaints online at consumerfinance.gov/complaint or by phone at (855) 411-2372, and says most companies respond within 15 days ^[12]. It asks people who think they've been scammed by a credit repair company to file one ^[11]. The FTC takes reports at ReportFraud.ftc.gov and also points you to your state attorney general and state consumer protection office ^[3].

The FTC enforces the Credit Repair Organizations Act, and a state's attorney general can sue to stop violations and recover damages for the state's residents ^[13].

Do states have their own laws for credit repair companies?

Some do. The federal law leaves state laws in place unless they conflict with it, and some states add their own registration and bonding rules.

Companies still have to follow state law, except where a state law is inconsistent with the federal one ^[14]. Louisiana is one example. Its attorney general requires every credit repair services organization to register each year and file a $100,000 surety bond before doing business in the state ^[15][16], and people harmed by a violation can claim actual damages against that bond ^[16].

Rules vary by state. The CFPB suggests checking any company with your state attorney general's office and local consumer protection agency before you sign up ^[10].