Most companies have setup fees
Most credit repair companies charge an initial fee (also called setup or first work fee) that can range anywhere between $15 to $200. This fee is used to set up your account, which may involve gathering your personal and financial information and creating a strategy plan for your particular credit situation.
Credit repair companies can’t charge you in advance for their services
Once you pay the setup fee (if required), companies can’t make any additional charges unless they prove that the services offered to you in contract are being fulfilled.
Legitimate credit repair companies should include a copy of the Consumer Credit File Rights
Under the Credit Repair Organizations Act (CROA), credit repair companies must give you a written contract outlining their services before receiving any payment from you. The agencies must also give you a copy of the “Consumer Credit File Rights Under State and Federal Law,” a document that is meant to inform you of your right to order credit reports and dispute inaccurate information yourself.
You have the right to cancel any services without incurring any penalties within 3 business days
The CROA also states that you have the right to back out of a contract within three business days without any charges or cancellation fees. This is also stipulated by the Federal Trade Commission’s (FTC)’s Cooling-Off Rule.
Differences between debt settlement, credit repair and credit counseling
As we said above, there are different ways to repair your credit.
Debt settlement, credit repair and credit counseling are all in the personal finance sphere, but it’s important to note the key differences between the three methods.
| Debt settlement service | Credit repair service | Credit counseling service |
| For-profit service | For-profit service | Non-profit, but may charge a service fee |
| Resolves your debt and makes a deal to pay it off at a reduced amount | Identifies and repairs mistakes on your credit report | Provides debt and money management advice, but doesn’t renegotiate overall debt |
| Involves stopping debt payments until a settlement is reached. | Communicates with creditors and reporting bureaus to get mistakes corrected and removed from your credit report | Negotiates payment plans with creditors to protect you from debt collectors or late fees |
| Will impact credit negatively for up to 7 years | Improves credit by removing reporting mistakes | Improves credit with debt management plans |