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Do Credit Repair Services Work?

Most of us don't pay much attention to the barrage of credit repair advertisements flying at us across the internet, television, and radio. If you're dealing with bad credit, though, you're likely to sit up, take note, and wonder if these services work and whether they are worth the effort.

The first thing you should know is that when you decide to seek out a credit repair service, you step onto a trail with predators hiding in the long grass on both sides. Some companies imply they can significantly improve your score, while others will promise to "fix" it entirely. If you think you smell a rat, you probably do.

Unfortunately, many of these claims about what a company can legally do to improve your situation are misrepresentations, if not outright lies. These companies will attempt to charge you hundreds, if not thousands of dollars to "resolve" your problems. As you've probably guessed by now, the offered services are nothing more than a fraud. So, with these predators seeking to prey on desperate people in dire financial straits, how do you avoid becoming a snack for one of them?

The Reality
Knowledge is power, so it's time to empower yourself with the truth. First truth: there is no silver bullet. Nobody can fix our credit overnight, and anyone who says they can is a liar. Does this suck? Yes! A bad score drags you down with high-interest rates, higher insurance rates, and larger security deposits if any institution does business with you at all. It's a difficult situation that can leave people desperately seeking help. Don't allow the burden to cloud your judgment. These scammers home in on your emotional vulnerability and leverage it to get money out of you. If they don't steal your identity (which happens often), you'll either be promised services that can't legally be accomplished, or be charged a lot of cash for something you could have done yourself for free.

That's right, you can take steps to help yourself, and it won't cost you a dime. We'll come back to that in a bit. First, you need to know a little about the system and how to spot a scam.

Know the System
The two primary scoring systems are FICO and VantageScore 3.0 -- the former developed by Fair Isaac Corp, and the latter developed by the three major reporting companies (Experian, Equifax, and TransUnion). The legal framework for this system is a federal statute known as the Credit Repair Organization Act (15 USC 1679).

Any person or business who charges money in exchange for credit improving services is legally defined as a credit repairing organization. That opens up the market to a wide variety of people. Most repair scams are illegal, but most victims do not complain, and the Federal Trade Commission (FTC) does little to enforce the act and take legal action against violators. There's a five-year statute of limitations on filing a complaint, so be careful.

To help you begin filtering offers, here are some things that a company cannot legally do:

Request payment before performing any services.

Make (or advise you to make) false statements on your report.

Prevent a valid search of your history by making changes to your identity.

Misrepresent any services they have offered to provide.

Fail to provide a disclosure statement (called a Consumer Credit File Rights under State and Federal Law).

Fail to disclose your legal right to obtain a free annual report from all three reporting companies (

Fail to disclose your legal right to dispute inaccurate information without their assistance.

Charge you for terminating a contract within three days of initiation.

Fail to supply a written contract, and obtain your signature, before performing any services.

You can revoke a contract within three days of signing it. Any contract offered to you must clearly outline how much you are required to pay, an accurate description of the services the company is agreeing to perform, and an estimate of how long it will take to perform the agreed services. If you go this route, make sure the contract includes a form that enables you to provide a notice of cancellation.

Remember, nobody can require that you waive your legal rights. Even if you accidentally drop the ball by signing something that implies you have agreed to waive your legal rights, any such waiver is completely void and cannot be legally enforced.

Scam Red Flags
Here are a few examples of situations that should put you on red alert. If the company:

Claims to have the ability to increase your score without specifically stating how.

Refuses to supply you with a copy of the contract before signing it.

Promises to give you a new identity.

Promises to remove any accurate, negative information from your history.

Demands money before performing services.

Fails to inform you of your right to cancel within three days.

Fails to provide an estimated date of service completion.

Refuses to inform you of the exact fees they will charge.

Requests money on a "per-account" basis.

Promises to perform any of the "cannot legally do" actions listed above.

If a company tries to pull any of these stunts, you need to run like an Olympic sprinter being chased by a cheetah.

Now for the Big Question -- Do These Services Work?
The most accurate answer you're going to get is, "maybe." Like it or not, if the bad information on your report is accurate, it's staying there. The best any legitimate company can do is assist you in taking the same actions you can do all by yourself. The shady people will want you to take deceptive, potentially illegal actions, or just steal your identity and run your credit even further into the ground.

If you want a legitimate company to take those actions for you, and you're willing to pay them, fine. All you need to do is find a legitimate company. The actions you need require no special expertise and aren't that difficult. You can do these things yourself.

In short, why pay somebody else to do something you can do yourself?

What You Can Do
Rather than using your money to pay a company, put it towards paying down debt and lowering card balances. Here are some more examples of actions you can take.

Obtain a copy of your report and review it very carefully.

Find and dispute any errors immediately.

Increase your credit limit, if possible.

Negotiate with collection agencies, if any.

Use just a couple of cards and diligently pay bills on time.

Under-use these cards to keep your credit utilization ratio low (use 30% of your limit or less).

If you can't obtain a regular card, get a secured card and pay all bills on time.

These are only a few tips. You can improve your credit and clear debt while paying all bills on time. All it takes is self-discipline and patience. It won't even cost you a dime.

Final Word
It is highly advisable to work directly with the reporting companies. All three offer a service to analyze your report file and discuss any issues with you in detail. On top of that, they'll run payment simulations to help you optimize your efforts to remove debt and improve your score. You can use these services for just a minimal fee.

When you look at what you can accomplish alone, why on earth would you pay some company to do anything, especially when you run the risk of being scammed? As the saying goes, knowledge is power. Consider yourself informed. Now it's time to take action! Get out there and rebuild your credit. It will take time and effort, but the outcome is worth it.

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