Updated: Mar 30, 2024

Should You Use a Credit Repair Company?

Find out whether it is worth the cost to use a credit repair company to fix your credit score or to reduce/remove debt through negotiations with creditors.
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Your credit may not be in the best shape -- millions of Americans have damaged or very bad credit.

This has caused the development of the credit repair industry.

And while many make high minded promises, it's one of the classic cases where if it sounds too good to be true, it probably is.

Should you use a credit repair company?

In most cases, probably not.

Let's see why…

How Credit Repair Companies Work

There are thousands of different credit repair companies across the country, with many different services provided.

But primarily, a credit repair company works to improve your credit. This is very different from services designed to get you out of debt.


The credit repair company will start by ordering your credit report, then reviewing the damage. But this is where they'll need your help.

Credit repair is not a situation where you turn your credit over to a repair company, and they get back to you a few weeks later with a clean bill of credit health.

You'll be asked to identify any mistakes on your credit report. If there are, you – not the credit repair company - will need to provide documentation proving the errors.

This may include correspondence with a creditor, or a copy of a cancelled check proving a collection account has already been paid.

If the credit repair company is successful in having one or more credit errors corrected, they’ll either request the creditor contact the three major credit bureaus to report corrected information, or the credit repair company may do it itself.

This is often the most time-consuming part of the process.

In cases where bad credit information is accurate, the credit repair company may attempt to negotiate an improvement directly with the creditor.

For example, if you have a collection account, they may require you to pay it off, in exchange for the collection agency removing the negative entry from credit report.

Collectively, all these efforts should lead to an improvement in your credit score.

However, if your credit report contains a large amount of negative information, and you have a very low credit score, the credit repair company may improve the situation, but probably can't make it go away entirely.

What Does It Cost?

Costs can also vary widely.

Most credit repair companies will charge an upfront fee.

This can be anywhere from a very small $15 to $25 to order your credit report, or a much larger fee, like several hundred dollars to begin the process.

There's almost always a monthly fee.

This can be based on either a flat amount, like $100 per month, or a percentage of the amount of debt you owe.

For example, if you owe $20,000, and the company has a 3% monthly fee, you'll pay $60 per month.

Either arrangement can result in an ultimate cost of hundreds or even thousands of dollars from the start of the program until it ends.

What to Watch Out For

There are various levels of experience among credit repair companies.

Typically, the better companies are law firms.

Not only do they know credit law, but just the fact that you have a law firm engaged on your behalf often makes creditors more cooperative.

However, they also often have the highest fees.


At the opposite end of the scale are credit repair companies that are complete scams.

In most states, there are no licensing requirements to start a credit repair business.

Anyone can start one, even someone who knows nothing about the process. Such companies are notorious for collecting fees, then doing little too improve your credit.

To avoid this outcome, look for the following when selecting a credit repair company:

  • Check out the company with third-party agencies, like the Better Business Bureau, or your state bureau of consumer affairs. Also, check for any ratings on websites like Yelp.
  • Do they have a website, and does it look credible?
  • When you call the company, can you easily reach a live person, or are you routed through a phone maze, that either brings you to a dead end or terminates your call?
  • Is there a physical location? If not, avoid that company. (You can usually check this out through Google Maps if they’re too far away to drive to.)
  • When they contact you by mail, it should be on professional letterhead.
  • Check with the Secretary of State in your state to see if the company is officially registered. This will be the case if it's a corporation, and usually if it's a limited liability company (LLC).
  • If the company requests a large upfront payment, this is a strong indication it's a scam. They may take your money, then do absolutely nothing for you.

Pros & Cons


  • The good ones can significantly improve your credit score.
  • They may even be able to fix a serious problem you had with one or two major accounts.
  • It may enable you to get back into good standing with certain creditors, even if the negative credit entries aren't erased.
  • Credit repair companies are an excellent alternative if you lack the ability to negotiate on your own behalf.
  • Companies that are law firms can produce the best results.


  • While a good credit repair company may be able to improve your credit, they won't be able to perform miracles. For example, in most cases they won't be able to increase a 550 credit score to 720. You have to be realistic in your expectations.
  • Credit repair companies are expensive, and some can be very expensive. Paying hundreds or thousands of dollars to one of these companies may improve your credit, but leave you deeper in debt.
  • Some credit repair companies are worse than worthless. They'll take your money, then do nothing to improve your circumstances.
  • The credit repair process can be notoriously slow. If, due to ongoing fees, you bale out of the program after just one or two months, there may be little improvement in your credit.

Spoiler Alert: You Can Do It Yourself

This is absolutely true.

Hiring a credit repair company is mostly about getting someone else to do what you could very well do for yourself.

It's mostly a matter of getting a copy of your credit report, then disputing all the negative information it shows.

For example, if late payments or collections are shown in error, call the creditor, then email copies of documents proving the information wrong.

In cases where negative information is legitimate, be ready to settle. For example, if you owe $500 on a collection, pay it off.

The negative entry will still be on your credit report, but a paid collection is always better than an open one.

In many cases, the collection agency will be willing to settle the debt for less than the full amount owed.

Finally, get straight with your credit going forward. One of the best ways to repair your credit is by adding good credit to offset the bad.

You can do this by taking either secured credit cards or credit builder loans from banks or credit unions.

Both are credit arrangements designed specifically for people with bad credit. You'll be given a low line of credit, which you will use like a credit card, then make regular monthly payments.

The lender will report your good payment history to the credit bureaus, which will raise your credit score.

Fortunately, time heals all when it comes to credit problems. Most bad credit falls off your report after seven years.

But your credit score will even begin to improve before that, as the bad credit accounts age out.

This will be especially true if you add new, good credit entries to the report. And you absolutely should.

Scams Exist

Some credit repair services are complete scams.

They'll take a large amount of money up front, then do nothing. Others will use the relationship to gain access to your identity, and use it to commit fraud using your name and Social Security number.

Be especially wary of any credit repair service that promises to improve your credit by creating a new identity.

That's completely illegal, and you can be held liable if you participate in the scheme.

Finally, there's a technique scammers use to immediately improve your credit.

They dispute all the negative information on your credit report, which causes those entries to be suspended.

This will temporarily improve your credit score while the dispute is in process.

But once the disputes themselves prove to be bogus, the information will return your credit report, and your score will plummet.

Alternatives to Credit Repair Companies

In most cases, you'll do better trying alternatives to credit repair companies.

Examples include:

Credit counseling

Credit counseling services are often provided by public agencies or charitable organizations.

There may be a nominal fee involved, or they may be offered free.

They usually won't negotiate your credit for you, but they'll show you how to do it, then how to improve your credit going forward.

Debt settlement

Debt settlement firms will help you if high debt is a major part of the problem.

And it usually is for people who have bad credit.

Law firms are usually the best suited for this type of service.


If your credit is really bad, and due mostly your inability to be able to pay your debts, you can pursue a legal option through bankruptcy.

The debts will be legally discharged, giving you a fresh start going forward.

From there, you can rebuild your credit and make sure you never fall into a bad credit situation again.

Do it yourself – the slow, fast way to repair your credit

We’ve covered this earlier, but you really can repair your own credit. You'll need to go through the steps to clean up what you can, then add good credit to the mix, and simply let the passage of time work its magic.

Final Thoughts

As a general rule, credit repair companies are best avoided. At a minimum, you'll pay a substantial cost for their services.

Under a best-case scenario, they’ll improve your credit score, but they won't give you a good or excellent score.

Worst case, they can be complete scams, that will either cost you money for doing nothing, steal your identity, or draw you into an illegal activity.

If you have bad credit, the best approach is to use one or more of the alternative strategies listed above.

Though none will provide a miraculous credit cure, that's only because no such outcome as possible.

It requires a series of steps, and the passage of time.

And if anyone promises you otherwise, including and especially a credit repair company, you should never believe them.