Is Credit Repair Legal?

FT Contributor
A key on a computer keyboard is highlighted in purple and reads "fix your credit!"

Suppose you recently ran your credit report and found that protects consumers from exploitation by credit repair companies. In that case, you might worry about how this can negatively impact your opportunities for home and auto loans, credit cards, and even some jobs.

Now, you want to get your financial life back on track, and you’re thinking about enlisting the help of a credit repair company.

While good credit repair firms are legitimate businesses, you’ll find plenty of online complaints about the services they provide and the results they deliver. Consequently, you might wonder if these businesses are legal, which is precisely what we’ll cover in this article.

Let’s start with the basics.

Table of Contents

What Is Credit Repair and How Does It Work?

Credit repair is the effort from individuals or companies acting on their behalf to dispute negative marks on credit reports and ultimately get them removed.

Credit repair companies start by downloading your credit reports from each of the three bureaus and then auditing them for any inaccuracies or potential instances of identity fraud. Then, the company sends a dispute letter to the reporting agencies and follows up to ensure they responded and took the appropriate action.

According to a 2013 study from the Federal Trade Commission, 25% of consumers had a mistake that might affect their credit score on at least one of their three credit reports.

All told, the goal is to make your credit reports as accurate as possible and to maximize your credit score.

Is Credit Repair Legal In All 50 States?

When it comes to credit repair, a service that’s legal in every state except for Georgia, two crucial federal laws exist that:

  1. Guarantee your right to dispute information on your credit reports;
  2. Specify which services a credit repair company can provide to you.

Let’s take a closer look at each of these laws.

Fair Credit Reporting Act (FCRA)

Before the Fair Credit Reporting Act (FCRA), reporting bureaus weren’t required to remove inaccurate information from a person’s credit report.

But in 1970, President Richard Nixon signed the FCRA — an amendment to the Consumer Credit Protection Act of 1968 —  into law, which provided additional consumer protections related to the accuracy, fairness, and privacy in credit reporting.

Among other things, the Act required that reporting bureaus investigate the disputed information.

The FCRA also specifies that:

  • You’re entitled to a free copy of your credit report.
  • If you find any inaccurate information, reporting agencies must respond to your dispute letter within 30 days, unless they need to follow up, in which case 15 days are added to the deadline.
  • The reporting agency must verify the information within five business days. If they can’t verify, then they must remove the item. If they can verify, then the dispute is rejected.
  • If rejected, you can include a 100-word statement in your credit report to explain your dispute. However, the negative item will remain.
  • The agency can terminate frivolous or irrelevant disputes.

With these details in mind, we’ll dive into another pivotal act related to credit repair agencies’ development.

Credit Repair Organizations Act (CROA)

The Credit Repair Organizations Act (CROA) is another amendment to the Consumer Credit Protection Act of 1968 that protects consumers from exploitation by credit repair companies.

Specifically, the CROA prevents credit repair companies from exaggerating what they can accomplish when it comes to a person’s credit score and from engaging in false or misleading advertising. They also can’t withhold the fact that prospective clients can accomplish many of the same actions on their own, such as disputing errors on their credit report, without paying any money to a credit repair company.

Furthermore, before a credit repair company performs any services, they must provide a contract that includes:

  • A “Consumer Credit File Rights Under State and Federal Law” disclosure that outlines the client’s rights.
  • A document outlining the expected services and how long these will take to complete.
  • A statement that lets you know you can cancel your contract with the credit repair company within three business days.

State Laws That Regulate Credit Repair

In addition to the above federal laws, most states have their own laws in place regarding the guidelines under which credit repair companies must operate, such as licenses, bonding, or regulating service fees. However, there can be some meaningful differences between them. For example:

  • After signing the contract, Californians have five days (versus three per federal law) to cancel services with the company.
  • In Florida, there are no license requirements for credit repair businesses operating in the state.
  • In Georgia, their state law overrides federal law and makes credit repair agencies operating in the state illegal (a misdemeanor).

If you need to find state-level laws, you can search online for “[state] credit repair laws,” which should return plenty of information.

What Can Credit Repair Companies Do?

The role of a credit repair company involves:

  • Identifying errors on your credit report;
  • Sending letters to the reporting bureaus;
  • Following up to ensure they took the appropriate action.

They can also work with your creditors to potentially settle your debt for less than your actual balance.

In addition, some credit repair companies offer credit counseling services, which help you learn and implement sound financial practices to keep your credit score as high as possible.

With these details in mind, credit repair companies cannot remove legitimate marks from your credit reports nor reduce the amount of time a negative mark appears on your reports. The only potential exceptions are goodwill deletions and paying for deletion.

Illegal Credit Repair Tactics

Beware of any credit repair company that uses these illegal tactics:

  • Recommends that only they contact the credit bureaus on your behalf;
  • Encourages you to change your Social Security number or acquire a new one in your name;
  • Emphasizes that you should get new credit using another person’s Social Security number or by applying for an Employer Identification Number (EIN);
  • Advises that you should dispute all negative marks on your reports.

Another common tactic used by credit repair companies to maximize your credit score is a process called “pay for delete.” As the name implies, this process is designed to remove legitimate marks from your credit report in exchange for money. But is it legal?

In a nutshell, yes, a credit repair company can ask your creditors (including debt collection agencies) for a pay for delete, something that’s protected in the FCRA.

However, even if the creditor agrees, it’s important to remember that late payments associated with the negative mark (e.g., collections) will continue to remain on your reports.

Spotting a Credit Repair Scam

While most credit repair companies are legal businesses with their client’s best interests in mind, some are only looking to take your money and provide little to nothing in return. The good news is that you can identify a scam credit repair company if they:

  • Guarantee that they can remove legitimate marks on your credit reports;
  • Require upfront payment;
  • Don’t provide you a contract that contains clear instructions about what they’ll do in exchange for your money;
  • Ask that you engage in any of the illegal activities above;
  • Avoid explaining your rights as a client;
  • Encourage you not to contact the credit reporting agencies;

Another excellent method for identifying scam credit repair companies is by searching online for customer reviews. If you read many of the same complaints from different clients, you’ll likely experience the same after signing a contract.

Image Source:


Keep Learning


Want a FREE Credit Evaluation from Credit Saint?

A $19.95 Value, FREE!

This site is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as This compensation may impact how and where links appear on this site.  This site does not include all financial companies or all available financial offers. Learn more in our Earnings Disclaimer.
Get a FREE Credit Evaluation from Credit Saint Today!