The FTC wants you to know: Most of what credit repair companies charge you can do yourself for free. And the things they promise sound too good to be true? These are usually illegal.
Because credit scores affect everything from apartment rentals to job applications, the desperation to fix bad credit makes people vulnerable to scams. The FTC just released new guidance on detecting credit repair fraud – and the warning signs are everywhere.
IllegalCharge before work is finished
3 daysYour legal right to cancel
What credit repair companies CANNOT do
Here’s what the FTC says is outright illegal for credit repair companies:
- Remove accurate negative information – If you really missed these payments, no one can legally make them disappear
- Charge before you are helped – They must complete the work before they can collect payment
- Lying about what they can do – Promises to “cancel your debts” or “give you a new credit file” are lies
- Skip the written contract – They must explain your rights and the total costs in writing before starting the work
- Asking you to lie on credit applications – This is fraud and you may face criminal charges
This echoes a recent FTC warning about influencers pushing illegal credit repair “hacks” on social media. The tricks they promote – such as disputing correct debts as ‘fraud’ – can lead to criminal charges for those who follow their advice.
What you can do for FREE
Everything legitimate credit repair companies do, you can do yourself without paying a cent:
- Get your free credit reports – Visit AnnualCreditReport.com (the only official source)
- Dispute errors in writing – Write to both the credit bureau AND the company that reported the incorrect information
- Pay bills on time from now on – This is the number 1 factor in credit scores
- Pay off existing debts – Lower credit utilization helps restore scores
- To wait – Negative information is removed from your report after 7 years (10 in case of bankruptcy).
Where you can get real help
If you need guidance, the FTC recommends the following:
- Local credit unions – Many offer free financial advice to members
- University financial programs – Offer free community resources often
- Military personal finance managers – Free for service members and families
- Non-profit credit advice – Look for NFCC accredited agencies
Credit repair companies cannot legally remove negative information that is accurate and current from your credit report.— Federal Trade Commission
The bigger picture: why credit repair is usually the wrong focus
Here’s what most people miss: Obsessing over credit repair often means ignoring the real problem.
If you have bad credit due to missed payments and overwhelming debt, “repairing your credit” without addressing the debt is like putting a new coat of paint on a burning house. The underlying math is still not right.
Take our Find Your Path quiz to understand whether your focus should be on credit repair, debt reduction, or a brand new start.
Key Takeaways
- Credit repair companies cannot legally remove accurate negative information
- It is illegal for them to charge before the work is completed
- You have a three-day right to cancel any credit repair contract
- Everything they do, you can do yourself for free
- Anyone who promises instant results or “new credit files” is cheating you
- Focus on the underlying debt, not just the credit score
Frequently asked questions
Can credit repair companies remove collections from my report?
Only if the collection is incorrect. If you really owed the debt and it was collected, no one can legally remove it before it ages according to your report (usually seven years). They can dispute it, but if the collector verifies it’s correct, it stands.
What about ‘pay for removal’ schemes?
Some collectors will agree to remove a collection in exchange for payment. This is a negotiation between you and the collector, and not something a credit repair company can guarantee. And you can submit this request yourself for free.
How long does it take to rebuild credit?
It varies. If your credit problems are the result of missed payments, consistent, on-time payments can show improvement within six to 12 months. If you’ve gone bankrupt, most people can qualify for new credit within 2 years and get good scores within 3-4 years.
Do I have to pay a credit repair company anything?
In most cases not. The FTC says you can do everything they do for free. If you need help navigating the process, look for nonprofit credit counseling agencies; they offer free or low-cost guidance without the risk of scams.
What should I do if I have already paid to a credit repair company?
If they charge you before you do any work, that is illegal. You can file a complaint with the FTC at ReportFraud.ftc.gov and with your attorney general. You may be able to get your money back through your credit card company’s dispute resolution process.
(Source: Federal Trade Commission)
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