What a Credit Repair Company Can and Cannot Do

Credit repair is a real, legal service with real limits. Understanding both helps you decide whether it is worth paying for, and protects you from companies that sell what they cannot deliver.

What can a credit repair company do?

It can do the things you are entitled to do yourself under the Fair Credit Reporting Act, and do them on your behalf with more time and organization than most people have.

• Review your reports. Reading three reports line by line and explaining what each section means is where most of the value is. Many people have never seen their own reports.
• Identify disputable entries. Inaccurate, incomplete, outdated or unverifiable information can be disputed. That includes accounts that are not yours, wrong balances, on-time payments reported late, duplicated debts, and items past their reporting period.
• Send and track disputes. Disputes go to each bureau reporting the item and, where appropriate, to the company that furnished it. Bureaus generally have 30 days to investigate. Incomplete responses often need a second round.
• Explain what a lender will care about. A vehicle lender, a mortgage underwriter and a business lender weigh things differently. Useful preparation is specific to the application you plan to make.

What no credit repair company can do

• Remove accurate negative information before its time. The CFPB notes that most negative information can stay on a report for up to seven years, and some bankruptcies for up to ten. If it is accurate and current, it stays.
• Guarantee a score. Scores respond to what actually changes on your reports and to your ongoing behavior. Nobody controls how a bureau or creditor answers a dispute.
• Erase a debt you owe. A reporting error can be corrected. The underlying debt, if valid, can still be collected.
• Give you a new credit identity. Advice to apply for an Employer Identification Number and use it in place of your Social Security number is a scheme, and using it is a federal crime.

Warning signs the FTC tells consumers to watch for

The Credit Repair Organizations Act sets rules for every credit repair company. A company breaks them, or is behaving badly, when it:

• asks for payment before it has performed the promised services;
• does not give you a written contract stating the services, the total cost and the expected timeframe;
• does not tell you about your three-day right to cancel;
• tells you not to contact the credit bureaus yourself;
• advises you to dispute information you know is accurate;
• promises a specific result.

A worked example

Suppose your report shows a $1,900 collection from a medical provider, a vehicle loan reported as 60 days late in a month you paid on time, and a store card you never opened.

The store card can be disputed as not yours and, if the furnisher cannot verify it, removed. The late payment can be disputed with your payment confirmation as evidence. The medical collection, if it is accurate and yours, is a different question: it may be worth confirming the balance and the dates, but a legitimate company will not tell you it can simply make it disappear.