Credit repair is a $6.5 billion industry that’s rife with fraud and scams. While credit repair companies often claim they can “erase” bad credit or boost your scores, claims like these are usually false or misleading.
Unfortunately, the sales pitch works on many people who want to improve their credit for milestones like refinancing a home, including financially savvy seniors. But you don’t need to work with a credit repair company, since you can take your own steps to fix your credit without spending a penny.
What is credit repair?
Credit repair is the process of correcting inaccuracies or disputing mistakes on your credit reports to maintain or improve your overall credit.
Credit repair companies claim they can improve your credit in exchange for a fee. The main service they offer is filing disputes, or requests asking the credit bureaus to change information on your reports.
Credit repair companies rely heavily on the fact that most consumers don’t know the truth about disputes:
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Every person has the legal right to file credit disputes for free
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Filing is a simple process that takes as little as five minutes
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No person or agency can legally remove accurate information from your credit reports
Still, some credit repair companies charge thousands in upfront fees (which are illegal) or hundreds a year in recurring fees, without ever delivering results. Some even go so far as to have customers commit federal crimes, such as falsely claiming to be victims of identity theft, in order to get information removed from their credit reports.
Perhaps what’s most alarming is the fact that, of the estimated 46,000 credit repair services, the CFPB says the vast majority are sole proprietorships, meaning they’re run by just one person.
How to recognize a credit repair scam
Just because a credit repair company is well known or comes highly recommended doesn’t mean it’s trustworthy. For example, Lexington Law and Credit Repair, two of the largest credit repair brands in the U.S., have both been sued by the CFPB multiple times for illegal conduct.
If you’re thinking of hiring a company to improve your credit, look past their reputation and beware of these red flags for a scam:
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Claiming they can “erase” bad credit
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Guaranteeing they can improve your credit reports or scores
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Asking for upfront payment
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Encouraging you to make false statements
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Offering to create a new credit identity for you
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Refusing to give you a written contract
Dig deeper: Top financial scams targeting older Americans — and what you can do to keep your money safe
DIY credit repair: 5 steps to clean up your credit
When it comes to errors on your credit reports, you have the legal right to get the information removed or fixed for free. In fact, you’re more likely to be successful if you handle the process yourself, given the screening criteria in place at credit bureaus to identify complaints from third parties, like credit repair companies. Here’s what you can do.
1. Order copies of your credit reports
Go to AnnualCreditReport.com or call 877-322-8228 to pull copies of your credit reports from the three major credit bureaus: Equifax, Experian and TransUnion. This service is free and is the only federally authorized source for your full reports.
You can order each of your reports every 12 months, thanks to the federal Fair Credit Reporting Act.
2. Pinpoint errors
Look through your credit reports to see if there are any errors relating to your identity or debt, including:
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An unfamiliar name, date of birth or Social Security number
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Accounts that don’t belong to you
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Negative information that resulted from identity theft
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Payments incorrectly reported as late
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Debt incorrectly showing as unpaid
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Applications for credit that you did not personally make
Pay close attention to lenders or card issuers under “credit inquiries” or “hard inquiries.” A hard inquiry or “hard pull” means that a creditor has requested to check your credit history as part of a loan or application. If you see an inquiry that you don’t recognize, call the company listed to gather details and lodge a complaint, and then add it to a list for filing a dispute with the credit bureau.
3. Gather supporting evidence
If you find errors in your credit reports, check to see if you have documents that support your claim. This might include anything from a bank statement to an email or a copy of your ID.
Not all disputes will require you to submit supporting documentation, but it’s good to have on hand if you need it.
4. File your disputes
You can dispute a credit error with both the credit bureau and the agency that supplied the information, which is usually a credit card issuer or lender. The CFPB recommends doing both.
Here’s how the credit bureau dispute process works when you file online:
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Go to the dispute page for the credit bureau that reported the error: Experian, Equifax or TransUnion.
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Follow the prompts to identify the errors and, if applicable, upload your documents.
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The credit bureau usually has up to 30 days to investigate your claim.
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The bureau will send you a letter or email to inform you of the outcome.
If you find information after you’ve submitted your dispute that could support your claim, you can resubmit the dispute with the new details.
5. Add positive information
Filing disputes can help you improve your credit, but there are other steps to take to build and maintain good credit over time. Namely, you need to add positive information to your file. The best way to do that is by paying your debts on time every month and by keeping your credit card balances to a minimum.
Dig deeper: Do credit scores matter after you retire?
🔍 What if I find evidence of identity theft in my credit reports?
If you suspect you might be a victim of identity theft, report it at IdentityTheft.gov. Backed by the Federal Trade Commission, this site can help limit the damage of ID theft and provide support to recover more quickly.
You can also submit a report if you think your information was exposed in a recent data breach.
Dig deeper: 5 practical ways to keep your financial information and identity safe online
Where can I get professional help?
Turning to a credit repair company can cause more problems than it solves. Instead of taking that risk, reach out to one of these reputable sources for help with credit problems:
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Certified credit counselor. A certified credit counselor at a nonprofit counseling agency can read your credit reports with you, walk you through the dispute-filing process and offer advice on how to manage debt, build credit and create a budget, even on a fixed income. Credit counselors are certified by the National Foundation for Credit Counseling, which offers an online form to connect with help.
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Consumer Financial Protection Bureau. If you disagree with the results of your dispute, you can submit a complaint to the CFPB, and they’ll work with the involved parties to get it resolved.
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Attorney or credit repair lawyer. For legal advice on credit reports and disputes, contact your local bar association or department of consumer affairs to get connected with an experienced attorney who specializes in credit repair.
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FAQs: Your credit reports, disputing claims and more
Learn more about how to repair your credit and your rights as a consumer.
Is credit repair the same as credit counseling?
No. Credit repair companies are for-profit enterprises that focus only on filing disputes with lenders, creditors and credit bureaus — nothing you can’t do yourself — for a fee.
Credit counselors, however, work for nonprofit organizations and counseling agencies to provide free help with budgeting, building credit and managing debt for long-term success. You can find a certified credit counselor through the National Foundation for Credit Counseling.
Can I cancel my services with a credit repair company?
Yes. You have the right to cancel services with a credit repair company or organization within three business days after your contract’s date for any reason, without fees or penalties, according to the law. Simply contact the company and tell them you’re canceling.
If the credit repair company you’re working with did not provide you with a written contract, report it to the FTC and file a complaint with the Consumer Financial Protection Bureau. Under the Credit Repair Organizations Act, credit repair companies are required to provide you with a written contract detailing what it’s providing you, its obligations and your rights before providing services.
Do I need to file my dispute with all three credit bureaus?
No, unless the same error appears on more than one bureau’s report. If you find an error or incomplete information on your report, you’ll dispute the issue with the credit bureau you received the report from.
Should I strive to be debt-free when I retire?
Entering retirement without debt is ideal, but it’s not always necessary or even optimal. Your goal should be to retire with a manageable debt-to-income ratio that allows you to live comfortably within your means. But if you’d prefer to get out of the red, learn about the top debts to prioritize paying off before you retire.
Sources
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Credit Repair Services in the US – Market Size, Industry Analysis, Trends and Forecasts (2024-2029), IBIS World. Accessed October 21, 2024.
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The High Cost of Bad Credit, New York Times Magazine. Accessed October 21, 2024.
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A Summary of Your Rights Under the Fair Credit Reporting Act, CFPB. Accessed October 21, 2024.
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Annual report of credit and consumer reporting complaints [PDF], CFPB. Accessed October 21, 2024.
About the writer
Sarah Brady is a finance writer and educator who covers a wide range of topics, from personal and small business credit and loans to financial scams. Her expertise has been featured in Yahoo Finance, Forbes Advisor, CNN, Fortune, Investopedia and other top media brands. As an NFCC-certified credit counselor, Sarah taught workshops on money management and coached thousands of clients on how to improve their credit. She is also a former HUD-certified housing counselor and educator for the City of San Francisco’s affordable homebuyer programs.
Article edited by Kelly Suzan Waggoner
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