How credit repair companies work

If you have bad credit, you may be tempted to click on an Internet ad that promises quick and easy credit repair. At best, the company will do the same things you can do on your own to improve your credit score. At worst, they'll engage in deceptive or even illegal practices that could cause you major headaches later.

Legitimate credit repair companies may help you do all the things you can do yourself, from disputing incorrect details on your credit report to helping you automate your payments. Still, there's no reason for you to pay someone to tackle these issues, which require no specialized expertise. Simply paying your bills on time and slashing your credit card debt will go a long way to repairing bad credit.

Many credit repair firms will use shadier tactics, says Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling in Silver Spring, Md. "They might suggest that you get a new Social Security number to create a new credit file in your name," she says. "Of course, that goes against the intent of a credit report."

Another common scheme for those in need of credit repair is to flood creditors with disputes of their debt. The creditor must remove the disputed debt from the file until it's resolved, which can take up to 30 days. Meanwhile, the borrower can submit a "clean" report while the files are under review. "The purpose of a credit report is to accurately reflect your credit history," says Cunningham. "Anything that circumvents that intent won't end up good for you or the lender."

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