Credit repair is when a third party, often called a credit repair organization or credit service organization attempts to remove information from your credit reports in exchange for payment. These companies are for-profit and their services are marketed to help people improve their credit. Credit repair is legal at the federal level and in almost all states.


Some credit repair companies suggest that their services are designed to help consumers remove inaccurate or unverifiable information from their credit reports. In reality, however, many credit repair companies are simply trying to get negative, but accurate information removed from credit reports before it naturally disappears from a credit report.

Credit Repair Organizations Act

The federal Credit Repair Organizations Act not only defines what a credit repair organization is, but also how these businesses must operate. Enacted in 1996, CROA clearly articulates what credit repair companies must and must not do to continue to comply with federal law.


Practices that are not allowed under CROA include:

Advising credit repair clients to make false statements to credit reporting agencies

Advise credit repair clients to change their identity to prevent credit bureaus from associating them with their credit information


  • Charge credit repair clients for any fees for services that have not been fully rendered
  • Ensuring that they can remove information from the credit reports of their credit repair clients.
  • The CROA also requires credit repair companies to notify their clients of the following:
  • They have the right to dispute the information on their credit report for free.
  • They can sue the credit repair company if they violate CROA
  • That while credit bureaus must maintain reasonable procedures to maintain the accuracy of credit information, errors can occur
  • Credit repair companies cannot hide the above notices in the language of their contracts. These disclosures and others must be provided in a separate form. And finally, credit repair companies cannot force or entice you to sign a waiver whereby you waive some or all of the aforementioned rights. Any attempt to do so would be a violation of the CROA.

What do credit repair companies do?

Ultimately, credit repair companies contact the credit reporting agencies or companies that reported or "provided" your credit information to the agencies on your behalf. These data providers are almost always debt collectors or financial services companies, such as banks and credit card issuers.


The credit bureaus or providers are intended to remove credit information entirely or modify it in a way that is more favorable to the consumer. Communications from credit repair companies can be made via the Internet, phone, or US mail. US mail has historically been the preferred method of credit repair companies for several reasons.

Sending a few letters to the credit bureaus may seem unsophisticated, but it's the approach that works with the way that credit repair companies tend to operate. Some credit repair companies employ a process called "lockdown," which involves sending repetitive and often frivolous letters to credit bureaus and their data providers.

The theory is that if a credit repair company can send out a large volume of dispute letters challenging the same item over and over again, at some point, a credit bureau, lender, or debt collector will not be able to process the dispute within the 30 days. specified by the Fair Credit Reporting Act (FCRA), resulting in account deletion.

How much does credit repair cost?

Credit repair companies generally charge in two ways. The first is a garden variety subscription service in which the credit repair company charges your credit card at the end of the month for services performed during the previous month. Credit repair subscriptions generally range from $ 50 to $ 100 per month, although there may be outliers. With the underwriting fee structure, the credit repair company has a financial incentive to keep you as a paying customer for as long as possible.

The second method of payment for credit repair is called "pay for elimination." With pay for removal, the credit repair company only charges you when an item on your credit report is removed based on their efforts. The theory of pay per elimination is that it keeps the customer happy because they are only paying for tangible results, and the credit repair company remains on the right side of the CROA because they don't charge their customers until after the results have been produced.


Does Credit Repair Work?

While some credit repair companies claim to have eliminated millions of negative credit entries, there are no reliable statistics available on the effectiveness of credit repair services. There are also no statistics on the impact of credit repair on their clients' average credit scores, how many of the disputes they bring up result in the elimination, or the average price paid by a credit repair client.


Since there is nothing a credit repair company can do that you cannot do yourself, it is best to ensure the accuracy of your credit reports on your own. The process is free and always has been. Also, keep in mind that accurate negative information will automatically be removed from your credit reports once it is seven to 10 years old.