Credit Scores & Credit Monitoring What To Do About Bad Credit Is Credit Repair Illegal? Laws can be strict for credit repair agencies By LaToya Irby LaToya Irby Facebook Twitter LaToya Irby is a credit expert who has been covering credit and debt management for The Balance for more than a dozen years. She's been quoted in USA Today, The Chicago Tribune, and the Associated Press, and her work has been cited in several books. learn about our editorial policies Updated on November 28, 2021 Reviewed by Khadija Khartit Reviewed by Khadija Khartit Twitter Website Khadija Khartit is a strategy, investment, and funding expert, and an educator of fintech and strategic finance in top universities. She has been an investor, entrepreneur, and advisor for more than 25 years. She is a FINRA Series 7, 63, and 66 license holder. learn about our financial review board In This Article View All In This Article What Can Credit Repair Companies Do? Which Practices Are Illegal? Is Credit Repair Legal in All States? How to Repair Your Credit On Your Own Photo: Thomas Barwick / Getty Images Credit plays a huge role in your life; you may not realize just how important credit is until you’re well into adulthood. It only takes a few bad moves to damage your credit score, making it difficult to get approved for credit cards, car loans, and other credit-related services. You may consider hiring a credit repair company to get your credit back on track. These companies work with the credit bureaus on your behalf to try and remove certain negative information from your credit report and raise your credit score. While credit repair is a legal industry, there are specific federal guidelines that regulate what companies can and can’t do. What Can Credit Repair Companies Do? Whether you do it yourself or hire a service, credit repair itself is not illegal. The Fair Credit Reporting Act gives consumers the right to an accurate credit report, which allows you to start a formal dispute with credit bureaus about any inaccurate or incomplete information. Just like you, credit repair companies can review your credit report, identify negative or erroneous information, and create strategies for improving your credit. They can write letters on your behalf that dispute inaccurate information or ask for a goodwill review of your account history, follow up to ensure any inaccurate information is removed, and, in some cases, continue to monitor your report to address any new erroneous information. Note Before getting started, the credit repair company is required to let you know about your rights to obtain a credit report on your own and dispute inaccurate credit report information. By law, a credit repair company must provide you with a contract that outlines the services it will perform on your behalf. The contract should include: Payment amount requiredA detailed description of the services you’ll getDeadline to complete the servicesA statement that you can cancel the contract within three business days Furthermore, the credit repair agency is not allowed to perform any services until the three-day cancellation period is complete. Some credit repair companies also provide educational material, credit tools, and credit all of which could help you maintain your credit score long-term. Which Credit Repair Practices Are Illegal? The Credit Repair Organizations Act (CROA) is the federal law that outlines what credit repair companies can and cannot do. Up-front Charges Credit repair companies can’t charge you up front. You should only pay for credit repair services after they’ve been performed. Many credit repair companies get around this rule by offering subscriptions through which you pay each month for services that have been performed in the previous month. Another popular pricing model is called “pay-per-delete;” you pay the credit repair company for each item deleted from your credit report. Misrepresenting Services Credit repair companies can’t lie about the services they provide you, which includes promising to remove accurate information from your credit report or guaranteeing any specific results. Credit repair companies aren’t allowed to lie to the credit bureaus, either; they can’t dispute accurate information under the pretense that the information is an error. Unlawful Advice Credit repair companies can’t promise to create—or ask you to create—a new identity to help you conceal information on your credit report. Note Credit repair companies can’t ask you to waive the rights that are yours through consumer protection laws. Anything you sign that does waive your rights is void. Understanding your rights protects you from scams and illegal credit repair tactics. If you believe your credit repair company has broken the law during its dealings with you, you have the right to sue a credit repair company that violates your rights under the CROA. Are Credit Repair Services Legal in Every State? Credit repair is legal in every state with one exception: Georgia, where, generally speaking, it’s illegal to run a credit repair business. Civil penalties—including restitution to victims and fines to the state—may be enforced against companies that violate the law. How To Repair Your Credit Without Hiring Someone If you want to save money, you can do credit repair on your own with a little time and effort. Start the process by getting a copy of your credit history, then scanning all your accounts to spot inaccurate information, negative marks, and accounts that may not be yours. Clean Up Credit Report Errors Dispute any errors you find with the credit bureaus or directly with the company reporting the error. Write a letter explaining the error and send copies of any proof you have to support your dispute. You can get your credit reports from all three major credit bureaus for free through AnnualCreditReport.com, so you’ll only have mailing costs. Note Some free credit report websites let you file a dispute online with just a few clicks. Seek Alternate Professional Help Consumer credit counseling is an option if you have more debt than you can handle and you need help working with your creditors. A credit counseling agency works with your budget to create a debt management plan that lowers your monthly payments to your creditors. In some cases, you may pay a small monthly fee for the services you receive. Working on your credit repair takes time, whether you do it yourself or you work with a credit repair company. Be patient with the process and maintain good credit habits while you’re rebuilding your credit. Add Positive Payment History As you’re working on correcting errors or coming up with a debt management plan, you may be able to “repair” your credit history by adding on-time payments. Your payment history accounts for 35% of your credit score, so the more timely payments you make, the better. Credit cards and loans provide the chance to build up a good payment history. However, poor credit scores can make it difficult to get credit cards or loans. Consider applying for a secured credit card as an alternative. The issuer will require you to make a deposit to open the account, and if you ever stop paying your bill, the issuer will use your deposit to cover the missing payments. If you’re able to get a secured credit card, make sure you set up automatic payments so that you always pay your bill on time. Also, a service like Experian Boost may be able to help you build a positive payment history by tracking payments you make to cellphone, utility, and streaming services. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Georiga Consumer Protection Division. "Carr Announces Consent Judgment With Above 701, Inc. Over Allegations of Illegal Credit Repair." Experian. "What Factor has the Biggest Impact on Your Credit Score?"