Good credit is important for many reasons. It makes it easier to get a credit card or loan with favorable terms. Bad credit can make it difficult to rent an apartment, find a new job, or get a cellphone contract. In most states, insurance companies use credit-based insurance scores to set rates. Good credit could help you pay lower premiums; bad credit could cause you to pay more.

Faced with these financial challenges—and many more—it’s easy to see why someone with bad credit, who is desperate for help, will fork over hundreds of dollars (sometimes thousands) to a company that guarantees to solve their credit problems.

“Any company that promises it can hide or remove your bad credit history for a fee is scamming you,” said Amy Nofziger with the AARP Fraud Watch Network. “If they insist you pay an upfront fee of any kind, for any reason, before they will do any work on your behalf, run away as fast as you can because it’s a scam,” Nofziger said.

If you believe the ads—and you should not—these “credit repair” companies can quickly and dramatically boost your credit scores by removing all negative items (such as late payments and bankruptcies) and so-called “hard” inquiries from your credit files. Hard inquiries, which can lower credit scores, go into your file when you apply for credit, whether you’re accepted or not.

“The reality is vastly different from the promise,” said Gregory Ashe, senior staff attorney at the Federal Trade Commission’s Bureau of Consumer Protection. “Accurate negative information and hard inquiries cannot be removed legally from your credit file.”

April Brown, who lives in Maryland, got burned by a bogus credit repair company. She paid $300 to have negative items removed from her credit report, but it never happened.

“It was a scam; just a lot of broken promises,” Brown told Checkbook. “They weren’t there for me; they were there for the money. They were just jerking me around.”

Red Flag Warning:  It is illegal for credit repair companies to charge customers until the promised work is done. Federal law, specifically the Credit Repair Organizations Act, prohibits upfront fees of any kind.

Many of the fraudulent credit repair companies sued by the FTC tried to disguise their advance fee. A common ploy is to require a purchase of some kind, such as credit monitoring, in order to use the “free” credit repair service.

The FTC told Checkbook: If the unrelated service is required prior to getting the credit repair service, then it's an advance fee, and in violation of the law.

Bogus Credit Repair Is a Lucrative Scam

Last year, the FTC shut down Grand Teton Professionals, a Wyoming company doing business as Deletion Experts, Inquiry Busters, and Top Tradelines, for running “an unlawful credit repair scam” that bilked consumers out of at least $6.2 million over five years.

In its lawsuit, the FTC alleged Grand Teton “used deceptive websites, unsolicited emails, and text messages to target consumers with false promises of substantially improving consumers’ credit scores.” Grand Teton “falsely claimed” it could remove all negative items and hard inquiries from the client’s credit reports, and then add them as “authorized users” to another person’s credit account (someone with good credit), a practice known as adding “tradelines” or “piggybacking credit” that’s designed to mislead lenders.

The complaint also alleges Grand Teton advised customers to lie to the credit bureaus by filing false identity theft affidavits, a federal crime.

Some customers paid as much as a thousand dollars and got nothing in return. Those who complained about the lack of results, or attempted to dispute the illegal advance fees, would be threatened with legal action, the FTC said.

In November, the FTC sent refund checks totaling nearly $150,000 to people who lost money to Grand Teton Professionals.

Spotting a Credit Repair Scam

The crooks who run credit repair scams know how to attract customers. They lie, make false promises, and claim they have special ways to do things you can’t do on your own.

According to the FTC, a credit repair firm is fraudulent if the company:

  • Insists you pay them before they do any work on your behalf.
  • Tells you not to contact the credit reporting companies directly.
  • Tells you to dispute information in your credit reports, even when you know it's accurate.
  • Tells you to give false information on your applications for credit or a loan.
  • Doesn’t explain your legal rights when it tells you what it can do for you.

Do It Yourself: Simple Ways to Boost Your Credit Scores

A company can legally offer to help you repair bad credit as long as it does not make false or deceptive claims or charge anything for its services until the job is done.

“Just remember, there's nothing a credit repair firm can do for you that you cannot do yourself for free, if you want to take the time to do it,” said Rod Griffin, senior director of public education and advocacy at Experian.

Start by getting a copy of your credit report from each of the big three credit bureaus: Equifax, Experian, and TransUnion. By law, you are entitled to one free report from each bureau every 12 months. Because of financial problems caused by COVID-19, you can request a free report every week until the end of April 2022.

If you see something that’s wrong, such as late charges you did not incur, a new account you did not open, or a property lien or bankruptcy filing that’s in error, contact your lender or creditor. If that doesn’t work, file a dispute with the credit bureau. You can do that for free, and the credit bureau is required by law to investigate.

The bottom line: There is no quick fix to bad credit. You cannot remove negative information that is accurate; only time will erase that splotch on your record.  

Late payments stay in your credit file for up to seven years. A Chapter 13 bankruptcy (which requires partial payment to creditors) is deleted after seven years from the filing date. A Chapter 7 bankruptcy (where none of the debt is repaid) is deleted after 10 years.

“The best thing you can do is to pay down the debts you owe and then catch up on any late payments and start making those payments on time, and you’ll begin to see improvements in your credit scores almost right away,” Griffin told Checkbook. “There's really no secret. It's about paying bills on time, every time, over time, and your scores will get better.”

Note: Late payment history is the most important factor in credit scores. Credit card utilization (the ratio between your credit balance and credit limit) is the second most important factor. A utilization rate under 20 percent on all your credit cards will help your scores. For example: If a card has a credit limit of $10,000, you should not carry a balance of more than $2,000.

If you feel you are in over your head, talk to a non-profit credit counselor, who can provide sound advice for your individual situation. They can help you set up a budget and may be able to negotiate with your creditors to reduce interest rates and penalty fees.

To find a non-profit counseling agency in your area visit the National Foundation for Credit Counseling website, or call 1-800-388-2227. The initial counseling session is free.

That’s what April Brown did after getting burned by her so-called credit repair company. She contacted CCCSMD, a non-profit credit counseling agency in Maryland, and now feels that she has someone looking out for her best interests.

“And they're helping me for free, so it’s a cool experience,” Brown told Checkbook. “I have a vehicle now. They helped me with my budgeting plan. It was kind of hard, but I did it, and I raised my credit up. I'm probably about a 640 now, so I feel that I'm moving in the right direction.

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Contributing editor Herb Weisbaum (“The ConsumerMan”) is an Emmy award-winning broadcaster and one of America's top consumer experts. He is also the consumer reporter for KOMO radio in Seattle. You can also find him on Facebook, Twitter, and at