Credit Repair Companies: How Do They Work?

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If you’ve battled with credit for most of your adult life, you aren’t alone. Many people are working their hardest to undo years of bad habits, but it takes a lot of work— both in core habit changes and developing financial literacy— to create a better relationship with money and fix your credit score.

Credit repair companies are popping up everywhere, most of them trying to help people along their credit repair journey. In this article, you’ll learn a bit about credit scores, what credit repair companies actually do, how they work, and some tips for working with them.

What Damages Your Credit Score?

Before you start investigating credit repair companies, it’s essential to understand what impacts your credit score in the first place. Your credit score is meant to be a high-level reflection of your credit history, from how much money you’ve borrowed to how well you pay it back.

The things that negatively impact your credit score are called negative items. Some common negative items include:

  • Missing or late payments
  • Getting sent to collections
  • A high debt ratio (e.g., borrowing everything you’re approved to borrow)
  • Hard inquiries (e.g., a car dealer or landlord pulling your full credit report)

These negative items have different weights on your credit score and different statutes of limitation. For example, getting sent to collections will have a far more significant impact than having your report pulled by a car dealer and will stay on your credit report for longer.


What is a Credit Repair Company?

Credit repair companies manage the process of improving your credit score by disputing negative items. They’ll look at your report, highlight items that could be disputed, and go through the tedious process of having creditors remove the item.

While the process of disputing negative items is nuanced, credit repair companies have limitations. First, they can’t remove items that are rightfully there. For example, your late credit card payment from last month is rightfully on your report. However, your late credit payment from eight years ago is past the statute of limitations and should be removed.

Credit repair companies don’t do anything that you can’t do yourself. However, it takes time and knowledge to get the job done.


Why People Use Credit Repair Companies

The best thing for repairing your credit is positive financial habits and time. However, some people use credit repair companies when time is of the essence. People who are trying to secure a home loan may use a credit repair company to help shorten the timeline and improve their chances.

How Do Credit Repair Companies Work?

When you enlist the services of a credit repair company, they’ll start by reviewing your credit report. It’s important to note that credit repair companies can’t legally ask for payment upfront. They’ll typically offer their initial consultation or review as a complimentary service. If a credit repair company asks for money to review your report, turn and run in the other direction.

Once they’ve highlighted what they can possibly have removed, the credit repair company will file a request for verification with the credit agencies on your report. The creditor will then have 30 days to respond with confirmation via post. If they are unable to verify your information, the credit repair service will request a removal.

The credit repair service will track their communications and progress and work with credit reporting agencies to reflect the changes they’ve made. As a consumer, you’ll likely have a monthly subscription charge or per removal charge as payment.

Tips for Working with a Credit Repair Company

Looking for a legitimate credit repair service is a must. Ask for recommendations and reviews from trusted sources. Check into the legitimacy of the company and ensure they’re in compliance with the regulations as mandated by the FTC.

Look for a credit repair service that’s honest and realistic. Someone who promises to have your credit completely corrected in a couple of months isn’t either.

How to Start a Credit Repair Company

Many people who go through the credit repair process decide to share their passion and start a credit repair company themselves. If you’re interested in how to start a credit repair business, start by taking a deep dive into the process and understanding the legalities around credit repair companies. Then, get the right tools and business structure in place to share your services with the world.


While a credit repair company can help you improve your credit score, it’s also essential to develop better money-handling habits. Consider reaching out to a financial educator or advisor to help you put a strong foundation in place for the future.

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Article Author:
Picture of Ashley Lipman

Ashley Lipman

Ashley Lipman is an award-winning writer who has a passion for sharing knowledge with readers around the world through her writing. She won her first award for creative writing in high school and hasn't looked back since!
Article Author:
Picture of Ashley Lipman

Ashley Lipman

Ashley Lipman is an award-winning writer who has a passion for sharing knowledge with readers around the world through her writing. She won her first award for creative writing in high school and hasn't looked back since!