Credit repair companies offer to help consumers improve their credit scores in return for a fee. Some are legitimate businesses, while others are little more than scams. Here is what a credit repair company can, and can’t, do for you.

Understanding Credit Repair

Consumers’ credit scores are based on a number of factors, including whether they pay their bills on a timely basis. Missing payments can hurt their credit score and, in turn, make it more difficult for them to obtain other credit, such as a mortgage or car loan, in the future. A poor credit score can also mean having to pay higher insurance rates and even make it more difficult to get a new job or rent an apartment.

Credit scores are calculated based on the information in the consumer’s credit report, and sometimes that information is inaccurate. That can happen when creditors report erroneous information to the credit bureau or if an identity thief takes out credit in the consumer’s name.1

Credit repair is the process of trying to correct those problems. If the information is accurate, there is little that anyone—even a professional credit repair company—can do to change it. In most cases, it will remain on the credit report for up to seven years, after which it will disappear.2

However, if any of the information in a credit report is inaccurate, the consumer has a right to dispute it. They can either do it by themselves or pay someone else to help.

Bear in mind that there is nothing that a credit repair company can do for you that you couldn’t do on your own.3 But you might consider hiring one if you feel overwhelmed by the process or simply don’t want to devote your time to it.

How Credit Repair Works

The first step in repairing your credit is to obtain your credit reports and check them for accuracy. By law, you’re entitled to one free credit report every 12 months from each of the three major national credit bureaus—Equifax, Experian, and TransUnion.4 The official website for obtaining your free credit reports is AnnualCreditReport.com.

Note that the information in your credit reports can differ from bureau to bureau. That’s because some of your creditors may report to one of them but not to the others.

Once you have your credit reports in hand (or on-screen) review them for errors. If they report late payments, for example, check your records to see if that’s true. Check, too, for any accounts that you don’t recognize. That could be a sign that someone else has opened an account in your name.

In case you discover errors, the Federal Trade Commission (FTC) outlines a dispute process you can follow.5

The FTC first suggests writing to the credit bureau (or bureaus) in question. Explain which information you’re disputing and attach photocopies of any documents that support your case. You can also contact individual creditors directly to contest information that they supplied to the credit bureau.

The law requires that the credit bureau investigate your claim within 30 days unless it considers it frivolous.3 The bureau must also provide your letter and supporting documents to the creditor that supplied the disputed information. The creditor is required to investigate your claim and report back to the credit bureau.