What Is Credit Restoration and Is It Worth It?

By Lauren Bringle
Published on: 08/16/2021

Credit restoration, or credit repair, is the process of disputing incorrect information on credit reports for the purpose of improving a poor credit score.

It’s important to point out that credit restoration is not the same as credit building. Credit building does not involve disputing inaccurate items on your credit report; credit building is the process by which you can improve your credit by taking positive actions on your own, such as:

  • Paying down debt
  • Making any past-due payments
  • Improving your credit mix
  • Making current and future payments on time

Put simply, the credit repair process focuses on fixing errors from the past, while credit building looks to improve credit by focusing on the future.

By the same token, credit repair/restoration and credit counseling are two different things. Credit counseling agencies are nonprofits. They’re set up to help consumers improve their financial situations through strategies like debt management and credit education. (A debt management program can bring your credit card interest rates down to as low as 8%).[1]

If you’re working with a credit counselor, you’ll receive free consultations. You won’t need to pay a fee. Credit repair companies, by contrast, are in business to make money and will charge you for their services. Whether those fees are worth it or not is something you’ll have to decide.

What Is Credit Restoration and Is It Worth It - asset 1

Are credit restoration and credit repair the same thing?

Yes, credit restoration and credit repair mean the same thing. Credit restoration usually involves deleting inaccurate negative credit items from your credit history in order to improve your credit score.

The term “credit restoration” most often refers to a service offered by a company in exchange for payment. “Credit repair,” however, can be used in the same context.

But credit repair doesn’t have to cost you money. If you don’t want to pay a fee to repair your credit, there are ways to fix errors in your credit report yourself for free.

In fact, the Credit Repair Organizations Act (CROA) requires that any credit restoration company notify you in writing that “You may, on your own, notify a credit bureau in writing that you dispute the accuracy of information in your credit file.”[2]

If you want to go this route, start by requesting a free credit report from annualcreditreport.com and looking for any discrepancies or potential errors in your credit history. You have the right to receive a free credit report once a year under the Fair Credit Reporting Act (FCRA).

Common reporting errors include transposed or incorrect identification numbers, balance errors, duplicate accounts, and incorrect reports of late payments. You may also find evidence of identity theft and fraud. You can dispute these errors with the three major credit reporting agencies: Equifax, Experian, and TransUnion.

If, however, you want to engage the services of a credit restoration company to do the work instead, that’s an option you can consider.

Are credit restoration companies legitimate?

Are credit repair companies legit?

Yes and no: Some are and some aren’t.

The simple fact is that there are legitimate credit repair companies and illegitimate ones, so it’s important to know how to tell the difference.

If a credit repair company tries to convince you they can offer an easy solution for your credit problems, that’s an important red flag. Credit repair can only work if there are errors on your credit report in the first place. No one can remove accurate information from your credit history, whether it involves a foreclosure, bankruptcy, or delinquent payment: you can’t, and neither can a credit repair company.

Any credit repair company that claims it can change your payment history by doing so is misleading you.

Another common ploy of illegitimate companies is a demand for upfront payment. Legitimate credit repair/restoration services costs money, but only after services are rendered, not before. Under the CROA, you also have three days to cancel any agreement with a credit repair company without incurring any charges.

Credit repair companies that are above-board will charge you for their services in one of two ways:[3]

  • For each item they succeed in removing from your credit report, or
  • For a monthly subscription rate, charging you for their services over the previous 30 days.

You’ll notice that both of these methods charge you for services once they're carried out, not beforehand.

In fact, under the Telemarketing Sales Rule, it’s illegal for a company to charge you for any credit repair service until six months have passed since it achieved the promised results. In other words, your credit report will have to show that the results were obtained six months prior to any billing.[4]

No legitimate credit repair company will charge you for something that’s already free (see our related article about avoiding credit repair scams). For instance, you’re entitled to a free copy of your credit report once a year; no company should offer to sell this to you. If a credit repair agency tells you not to contact one of the three main credit reporting agencies yourself, it’s a sign that something isn’t right. You’re entitled to do so under the law.

A more serious kind of credit repair scam involves providing customers with a nine-digit number it may refer to as a “credit privacy number” or “credit profile number.” This may, in fact, be a stolen Social Security number; if so, using it would be a federal crime under identity-theft statutes.[5]

What Is Credit Restoration and Is It Worth It - asset 2

Should I use legitimate credit restoration companies?

It can be hard to differentiate between legitimate credit-repair services and scams, so be patient and do your research before entering into any agreement.

Generally speaking, the adage holds true: If something sounds too good to be true, it probably is. A legitimate credit repair company won’t promise to raise your FICO® score instantly or give you results overnight.

Under federal law, credit repair companies are required to inform you of your rights. This includes the right to sue the credit repair agency if it violates the CROA and the right to dispute items in your credit report on your own.[2]

Here are some consumer protections you are entitled to so that if you do decide to use a credit restoration service you have some protection. Under the Credit Repair Organizations Act, you are entitled to the following:[2]

  • You can cancel any contract within three business days without incurring a fee.
  • You can’t be charged any fees if the service hasn’t been fully rendered.
  • You must receive an accurate description of the services being offered; specifically, companies aren’t allowed to guarantee the removal of credit report information.
  • You are entitled to lawful advice: Companies can't advise that you make false statements or assume a false identity.

No consumer repair company can ask you to waive any of these protections, either. Any contract that doesn’t conform with federal law will be treated as null and void.

A legitimate credit restoration company will not charge you up front for its services, and it will not promise you quick fixes or miraculously perfect credit. A good credit repair organization will, however, be able to offer you a plan with specific services listed and explained.

These services may include helping to identify erroneous information on your credit report and contacting the credit bureaus to have the errors removed; negotiating debt settlements with your creditors that may allow you to pay a lump sum to discharge your credit card debt at a reduced amount; and offering consultations and updates on the progress of negotiations or other services.

Availing yourself of the services of a legitimate credit restoration company may be worth it if you need help negotiating debt settlements with creditors or resolving complicated errors on your credit report, or if you truly do not have the time or ability to pursue these on your own. Remember, however, that you can obtain your credit reports and dispute any errors you may find there by yourself, for free.

If you feel you need further help, and you’re considering using a credit restoration company, be on the lookout for the following red flags.

What Is Credit Restoration and Is It Worth It - asset 3

Warning signs of credit restoration fraud

It’s a credit restoration/repair scam if the company:

  • Insists you pay them before having done any work for you
  • Attempts to get you to pay additional fees called “contributions”
  • Tells you to stop paying your debts or communicating with lenders/creditors
  • Advises you not to contact the three major credit bureaus
  • Advises you to dispute accurate information on your credit report
  • Tells you to lie on credit applications
  • Makes itself look like a government program
  • Fails to explain your legal rights when explaining the services they can provide to you

The bottom line

Good credit is an important asset, and achieving positive credit is a great goal. So it is worth it to restore your credit, because the benefits of good credit are far-reaching, and the impact of poor credit can be extensive. You don’t want to leave incorrect, negative information on your credit report when you could have it removed and improve your credit score.

The first step to repairing your bad credit may be to do some legwork on your own. Get your free credit reports, review them for errors, and contact the credit bureaus to ask them to remove any inaccurate information.

If there were several errors in your report, this step alone may go a long way in how to build credit score. You can also consider other methods like getting a credit builder loan to help improve your credit score.

Remember that technically, no credit repair company can do anything for you that you can’t do for yourself, for free. That’s why it’s smart to begin with your own review of your credit reports.

You may wish to consult a free credit counselor to learn debt management strategies and how to build better credit in the future. If you need further assistance to repair your credit, then a legitimate credit restoration company may, in fact, be worth investigating.

Be cautious. There are many scams out there that want to make you believe they can magically improve your FICO score by removing legitimate negative items from your credit report overnight. They can’t.

It can be difficult to tell legitimate credit repair companies apart from the scammers, but if you learn to spot the red flags, you can make an informed decision. Remember, too, that you won’t get something for nothing. Check into pricing to make sure it’s reasonable and you’ll be receiving something both legitimate and valuable in exchange for your money. Never pay up front for empty promises and hollow guarantees companies aren’t allowed to make under the law.

Beyond that, do your research. Check with the Better Business Bureau website, BBB.org, to see how the company rates and what kind of complaints have been made against it. Contact the Federal Trade Commission or your state attorney general if you have any questions.

You have options. If you are mindful of the red flags and do your own research, you can choose a credit repair organization that works within the law to help you clear past credit problems off your records so that you may have a healthier credit future.

But remember: You don’t actually need a credit repair company to fix errors in your credit report. You can do so yourself, and save yourself money in the process.


  1. Debt.org. “Credit Counseling vs. Credit Repair,” https://www.debt.org/credit/counseling/vs-credit-repair/. Accessed July 15, 2021.
  2. US Code. “15 USC Chapter 41, Subchapter II-A: Credit Repair Organizations,” http://uscode.house.gov/view.xhtml. Accessed July 15, 2021.
  3. CNBC. “Credit repair services can dispute credit report errors for you, but beware of scams and high fees,” https://www.cnbc.com/select/how-do-credit-repair-services-work/. Accessed July 15, 2021.
  4. Consumer Financial Protection Bureau. “Don’t Be Misled by Companies Offering Paid Credit Repair Services,” https://files.consumerfinance.gov/f/documents/092016_cfpb_ConsumerAdvisory.pdf. Accessed July 15, 2021.
  5. Equifax. “Avoiding ‘Credit Repair’ Scams,” https://www.equifax.com/personal/education/credit/report/all-about-credit-repair-companies/. Accessed July 15, 2021.

About the Author

Lauren Bringle is an Accredited Financial Counselor® with Self Financial – a financial technology company with a mission to help people build credit and savings. See Lauren on Linkedin and Twitter.

Editorial Policy

Our goal at Self is to provide readers with current and unbiased information on credit, financial health, and related topics. This content is based on research and other related articles from trusted sources. All content at Self is written by experienced contributors in the finance industry and reviewed by an accredited person(s).

self logo
Written on August 16, 2021
Self is a venture-backed startup that helps people build credit and savings. Comments? Questions? Send us a note at hello@self.inc.

Disclaimer: Self is not providing financial advice. The content presented does not reflect the view of the Issuing Banks and is presented for general education and informational purposes only. Please consult with a qualified professional for financial advice.

Take control of your credit today.

Please enter a valid email.