What You Should Know About Credit Repair Companies

If you’re losing sleep over bad credit, ads promising a quick fix can seem like a dream come true. But, hook up with the wrong company and your dreams of clean credit can quickly turn into a living nightmare.


While the economy has faltered in recent years credit repair companies have flourished. As is often the case, hard times for consumers create opportunities for scammers. An unscrupulous credit repair company may collect upfront fees, may make you pay for things you can get for free or may even persuade you to break the law.


If you are knee-deep in debt and thinking about a credit repair service, you should think twice about dealing with any company that:

  • Charges you a fee before performing any service.
  • Does not give you a written contract with a right to rescind the contract in three days.
  • Promises to erase negative information from your credit report, even if the information is accurate.
  • Guarantees to increase your credit score.
  • Encourages you to dispute accurate information with the credit bureaus.
  • Charges you a fee to obtain your credit report.
  • Discourages you from contacting the credit bureaus directly.
  • Encourages you to claim you are a victim of identity theft when you are not.
  • Encourages you to create a new credit “identity” by applying for an Employer Identification Number instead of a Social Security Number.
  • Encourages you to file for bankruptcy before first receiving required counseling from a counselor on the Credit Counseling & Debtor Education list approved by the US Department of Justice.

You should also know that when dealing with a credit repair company, the law gives you some protections. The Credit Repair Organization Act (CROA), 15 USC §1679l (1996), prohibits companies from making false claims and for charging before services are performed. The CROA also requires credit repair companies to give you a written contract that spells out:

  • A description of the services to be performed.
  • The total cost of the services.
  • When the result will be achieved.
  • Any guarantees the company makes.

In addition to the federal law, many states now have laws that cover the activities of credit repair companies If you have been the victim of an unscrupulous credit repair company, report it to the Federal Trade Commission, and your state attorney general. You may connect with your state attorney general through the website for the National Association of Attorneys General.


Before responding to any ad promising to repair your credit, consider the better alternative of contacting a member agency of the National Foundation for Consumer Credit, such as the Consumer Credit Counseling Service. These nonprofit groups have offices in most cities. To find the office nearest you, call or write:

National Foundation for Consumer Credit, Inc.
8611 Second Avenue, Suite 100
Silver Spring, MD 20910
(800) 388-2227


For more about credit repair companies, how to recognize a scam and tips on what you can do to help yourself, see the Federal Trade Commission’s publication Credit Repair: How to Help Yourself.