How Do Credit Repair Companies Work?

If you have bad credit, you know how hard life can be.

Something as simple as getting a cell phone is near impossible. Most stores will require a credit check before they give you a $500 cell phone on the promise you’ll keep paying the monthly fee for two years.

You may not even be able to rent an apartment. Many landlords will check your credit because once you move in, it’s really hard to get you out if you stop paying. They don’t want to risk it.

It’s not fair but it’s how life is – your credit and credit score is your key to practically everything.

If you have bad credit, good luck trying to rent an apartment. Or buy a house. It’s like a financial death sentence.

If you have bad credit, you might be tempted to look at credit repair companies. Maybe they have the answers you don’t. Maybe they have a way to rebuild your credit. Maybe there’s some secret sauce you can pay for and get your credit back on track. Perhaps they’ve promised to increase your credit score.

When you’ve heard “No” so many times and been turned away so many times, you’ll do anything to get to a “yes.”

Sometimes that means turning to a credit repair company. Let’s see what they do, if they work, and how to avoid the scams.

Table of Contents
  1. What does a Credit Repair Company do?
  2. How Much Does Credit Repair Cost?
  3. What Credit Repair Can’t Do
  4. How to Avoid Credit Repair Scams

What does a Credit Repair Company do?

Credit repair companiesle are doing something that you can do yourself and I’m going to explain exactly how to do it.

  • They will request your credit report from each of the three bureaus – Equifax, Experian, and TransUnion.
  • They will identify negative items on your credit report that can be disputed. If successful, it will increase your creditworthiness.
  • They will use a variety of strategies, such as a 609 letter, to try to get negative items removed from your credit report at each credit bureau. This includes disputing the items on the report as well as negotiating with creditors to get the negative records removed.

These are all things you can do yourself at zero financial cost… if you know-how. That’s the rub.

And it takes time. If you make a dispute, the credit bureaus will take as long as 30 days before rendering a decision. This gives them time to ask the creditor for proof, review it, and make a decision. Big companies have large systems that take a lot of time so it makes sense that it could take 30 days to process.

This lengthy delay also means you can request something and forget to follow up. Then it drags out and your time is less effective. The credit bureaus aren’t doing this on purpose, they’re just large companies with plenty of services and other customers. It’s just a bureaucracy like anywhere else.

Unfortunately, that also works out well for credit repair companies, which charge you every month.

I’m going to go through the list of services Lexington Law offers, they’re one of the most well known in the credit repair industry and explain exactly what I think the service describes:

  • Bureau Challenges – They go through your entire report and challenge the inaccurate records.
  • Creditor Interventions – They negotiate with creditors to ensure that the records are accurate.
  • InquiryAssist – They confirm whether all hard inquiries are accurate, removing those that aren’t.
  • Cease & Desist Letters – uses C&D letters to get debt collectors to follow the law and stop hounding you.

Score Analysis, ReportWatch, and TransUnion alerts – all listed as services included in PremierPlus and Concord Premier (but not the base level Concord Standard), can help you improve your score but don’t fall under services I consider credit repair. They can be pro-actively good for your credit but I don’t consider them repairs.

There’s always the argument that it’s not ethical to dispute accurate negative items. Credit repair companies will often dispute everything, whether it’s accurate or inaccurate. The disputes on inaccurate negative items are more effective because it’s more likely to be removed! In the end, accurate or not, if it’s getting in the way of you getting an apartment, a job, or some other loan and you’re responsible for you and your family, you do what you have to do. I think all is fair in the credit game.

How Much Does Credit Repair Cost?

If a company is legitimate and can give you results, the cost is quite reasonable. It can cost anywhere from $50 to $100 a month with no long term commitments.

For example, Lexington Law has packages starting at $79.95 a month all the way up to $119.95. You start with a free consultation so they can review your report and then pick a package based on what they can go after.

The more expensive the package, the more they go after. For example, the lowest tier gives you Bureau Challenges and Creditor Interventions (which alone may be good enough to improve your score significantly if it works). The highest includes services such as Cease & Desist letters to debt collectors (plus a whole host of other services, like ID theft protection).

If you are the type of person to change your car’s oil, credit repair services aren’t for you. You can do the research and do it yourself for less. You may not do it as well as the professionals but it won’t cost you a penny, so the return on your investment is astronomical!

If you want to do it yourself but aren’t sure what to do, you could use credit repair software instead. These are packages that guide you through the process, creating templates and checklists. They tell you what to do but you are the one doing it – it’s much cheaper than a service and you’re in full control.

What Credit Repair Can’t Do

Credit repair involves removing negative items from your credit report. If you have no credit, there’s nothing to repair. If you have no history, there’s nothing to repair.

If you have no credit history, you need to establish a credit history. You don’t need credit repair (nothing to repair!).

If you have no negative items, there’s not much a credit repair company can do to help. The most powerful arrow in their quiver is unavailable.

Also, if you need credit repair services, you will need to take the steps listed in my article on establishing a credit history at the same time. You’ll need to do things like getting a secured credit card that will start building credit while you remove negative items.

It’s like losing weight. You want to watch what you eat but you also want to increase your physical activity. Reduce the bad, increase the good, and you’ll see gains faster. You can use credit score simulators to see the results of different actions may have on your credit. Here are a few we recommend

How to Avoid Credit Repair Scams

It’s very important to do your homework because it’s very easy to pay a monthly fee and get nothing in return.

Sometimes it’s not the company’s fault – they couldn’t get anything removed. Your report was 100% accurate.

Sometimes they’re bad at what they do. Sometimes they do it slowly because they know you’re paying every month. The best way to find out is to do a ton of research, reading online reviews and stories from folks who have used them and had good results. Their results won’t be your results, and you will probably have to wade through fake positive reviews (nature of the world we live in) but that’s the only way to be sure.

If a company promises you results, run! No one can promise you a positive result in a specific period. No one can get results faster than the credit bureaus say they will move. Don’t believe any guarantees (unless it’s a money-back guarantee and you pay with a credit card).

It’s important to note that credit repair is not the same as debt consolidation or anything having to do with your debts. It’s strictly using legal methods of cleaning up your credit report. It involves paperwork, requests, and submissions — these are the various tools in the toolkit of a repair company. Debt is a separate matter.

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About Jim Wang

Jim Wang is a forty-something father of four who is a frequent contributor to Forbes and Vanguard's Blog. He has also been fortunate to have appeared in the New York Times, Baltimore Sun, Entrepreneur, and Marketplace Money.

Jim has a B.S. in Computer Science and Economics from Carnegie Mellon University, an M.S. in Information Technology - Software Engineering from Carnegie Mellon University, as well as a Masters in Business Administration from Johns Hopkins University. His approach to personal finance is that of an engineer, breaking down complex subjects into bite-sized easily understood concepts that you can use in your daily life.

One of his favorite tools (here's my treasure chest of tools,, everything I use) is Personal Capital, which enables him to manage his finances in just 15-minutes each month. They also offer financial planning, such as a Retirement Planning Tool that can tell you if you're on track to retire when you want. It's free.

He is also diversifying his investment portfolio by adding a little bit of real estate. But not rental homes, because he doesn't want a second job, it's diversified small investments in a few commercial properties and farms in Illinois, Louisiana, and California through AcreTrader.

Recently, he's invested in a few pieces of art on Masterworks too.

>> Read more articles by Jim

Opinions expressed here are the author's alone, not those of any bank or financial institution. This content has not been reviewed, approved or otherwise endorsed by any of these entities.

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  1. Neal Frankle says

    Jim, Great post – no surprise there.

    I agree – if a credit repair company makes promises it is a good bet they are not the service for you. I also agree that consumers should be wary and try to fix credit problems on their own if they have the time and patience. Having said that, there are times when it does make sense to call in experts. And if you go that route, only use a legal firm (IMO). Thanks for a great post Jimmy!

    • Jim Wang says

      Thanks Neal!

      I’d argue that you should try to do it on your own first because it’ll teach you how the whole system works. By knowing a little more, you can properly evaluate what companies will try to don your behalf.

      • Sylvetta says

        I’ve been working on doing it by myself one item at a time and while its not easy, its totally doable. I started with the “cheapest” item on my credit report and I’m working my way up. Credit Karma is awesome. I would say 30 days is about the average I see things updating.

        TMI Question for Jim or anyone who can help: I’m going to have to rent again before I can buy a house and I have one eviction on my credit that might get in my way. Is there an article about evictions and how to get them removed? I’ve heard horror stories about people paying it and it still not being removed for years. If I pay it, shouldn’t it fall off my credit report within 30 days like any other item?

        • Jim Wang says

          An eviction (technically, it’s not an eviction but a collection account for unpaid rent or lease) will appear in the Public Records part of the credit report and will say for 7 years. If it’s legitimate, a credit repair company can try to remove it but it’s unlikely.

          If 7 years have passed (from the filing date) and it’s still there, you can dispute it on the basis that the time limit has expired.

          If it were me and it is less than 7 years, I wouldn’t hire a company. If it’s been more than 7 years and it’s still on there, I’d try to get it removed myself or hire a company. The credit repair company is no guarantee but they’re just better about it since they’re professionals.

          I’d also check with tenant screening services since they will have a record of the eviction too.

          • Sylvetta says

            Thank you so much. I don’t have to move until July of next year but I want to be prepared. Looks like I have a lot of work to do.

  2. Jessica says

    I used Lexington Law many years ago after college as an ex-stepdad that used my credit (as well as my mom’s) as he saw fit and it was a mess! We both had great success with it! Took probably 2 years or so to get most all of it sorted but it got sorted and I bought a house a year later!

  3. Michael says

    Hi Jim,

    Great post! What credit repair companies do was a black box to me too. Thankfully, never had the need to know. I did learn something new today.

    It looks like anyone can do it by themselves – however, it would be a lot of work, tracking, and following through till everything gets resolved and buttoned up.


    • Jim Wang says

      It can be a lot of work if it’s something significant or it can be easy if you just one a blemish or two, but reviewing your credit report first will tell you all that.

  4. Latoya | Femme Frugality says

    I recently did a piece on this for one of my clients and my most important take-away was educating people on how to do it themselves first. There are some great credit repair companies out there who probably aren’t trying to rip people off; however, I can’t see myself paying for something I could do myself. And most likely, the same reasons many fall into bad credit situations need to be identified because it’s probably the same reasons they don’t want to make an attempt to fix it themselves.

    • Jim Wang says

      There are companies that have been at this for many many years with some great reviews… but the very nature of the credit reporting industry makes them expensive. You pay a monthly fee for a company to do things on your behalf, credit bureaus have 30 days to respond, you’re basically paying to wait sometimes.

      That said, if you don’t know what you’re doing or you’re not seeing success, a company might help. It’s like paying someone to do your yard work/maintenance… of course you can do it, but someone else (who costs money) could do it on your behalf (and might do it better). I feel this is the same way.

  5. Mustard Seed Money says

    I totally agree with you that these services don’t offer something that with a little education you the consumer can do on your own. With Youtube and Google available it always makes sense to give it a shot at first. It will teach you the process and make you better informed about how credit actually works. Thanks for sharing!!!

  6. Gerri Detweiler says

    Good explanation Jim. The credit repair options I have the most problem with are the ones that charge a lot of money to desperate consumers. I just spoke to a woman who has been quoted $7k to get a seriously negative item off her report! It’s accurate, she’s in the middle of trying to get a mortgage and there is no money-back guarantee. Yikes.

    • Jim Wang says

      Thanks Gerri! That’s why those places that promise results can’t ever be trusted – it’s shady whenever they promise to remove something you know to be accurate because there’s such a small probability it’ll get removed. Even by the pros.

  7. Gina says

    I used Lexington Law about 7 years ago and was a bit frustrated by the process. Probably because at the time I didn’t realize it was something I could have handled by myself, if I’d taken the time.

    I also had a few letters that were returned that they wrote on behalf of me. It was pretty eye-opening to see these letters and a bit embarrassing. I felt like they really “dumbed” me down, but maybe that was the point?

    At any rate, they didn’t help as much as I had hoped and I just had to wait the rest out.

      • MARK says

        yes ,i’ve seen the letters they send, misspelled words its horrific..and people pay $87 a month for that?

    • Jim Wang says

      Do you still have those letters? I’d love to see them if that’s possible?

      The reality is that it’s all stuff you can do yourself if you knew what to do – but a lot of folks don’t. As for dumbing you down, if it were me I probably wouldn’t care as long as it worked! Maybe the stats show that dumbing down someone works better?

      • Gina says

        I really wish I did have those letters still. I stumbled across them recently after having saved them forever and I think I threw them away. If by chance I find them again — I’ll show you.

  8. Moepete says

    Every day I verify disputes for a collection agency . I get many of the dispute letters that are sent from the credit repair companies disputing everything on their clients credit report. I know this because they send the entire list of bad debts. News flash, how about paying the accounts first. We will remove them if someone works hard to get them paid, but I see too many people wanting them removed and the accounts are valid debts and no payments have ever been made.

    • Jim Wang says

      This is where credit repair companies start losing credibility because they sometimes promise being able to get these legitimate debts off your report when, in fact, it’s only possible if the creditors are sloppy with record keeping (which they often aren’t). The customer pays the monthly fee, thinking it’s possible to have a legitimate old debt removed, until the process runs its course (with the repair company collecting the fees) and we find out it’s NOT possible.

  9. Alex Krim says

    I used Pyramid Credit Repair for both my wife and I and they sat down with me for 45 min and went through each line of item and had me share the story of how and why I was late or couldn’t pay – while they took notes.

    Mind you, that I had worked with a local credit repair company in the past and they challenged everything without ever doing this.

    So, in 2-3 months we finished our services with pyramid credit repair and most of the late payments were updated to be in good standing while the charge-offs were removed. Loved everything they stood for and most importantly the attentiveness and care.

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