Identification

• Sometimes called "credit repair clinics," credit repair companies offer customers help rebuilding their credit profile. Every consumer has a file with all three national credit reporting firms in the U.S. Negative events, such as missing a payment, may stay with a credit report for seven years or more. Credit repair companies purport to lend strategic advice to mitigate the damage from negative items. The claims of these companies can vary from helping dispute a mistake on a credit file, which can take weeks in complex cases, to illegal tactics, such as breaking into credit bureau computers. A repair company can also help guide the customer through the rebuilding process, such as suggesting a good credit card.
  
  

Considerations

• The Federal Trade Commission warns consumers that credit repair consumers mostly regurgitate information from the credit bureaus themselves or information that is widely known and easy to obtain. Fair Isaac, creator of the popular FICO scoring model, for example, lists the factors that go into its secret scoring formula. Looking at just the FICO formula, a customer immediately sees that paying bills on time and debt are the most important variable. The FTC also has a plethora of information on credit repair, such as the proper way to dispute a mistake. Credit repair scams are a major complaint to the FTC. Some shady credit repair companies take fees upfront and either never perform the services promised or disappear.
  
  

Benefits

• Legitimate repair companies do exist, but that does not mean they are still worth the money to most consumers. The customer that would benefit the most from a credit repair clinic is one without enough time or the wherewithal to deal with credit bureaus and creditors. A customer who has several errors especially difficult ones, such as when the bureaus mix up files, might need outside help. Even minor problems usually take at least four hours to correct, according to Bankrate.com. Some clinics might be able to negotiate debt settlements with creditors.
  
  

Tip

• If you still decide to explore credit repair companies, never deal with one that requires upfront fees or does not list the services it will perform -- these are federal requirements, according to the FTC. Also, be careful of fraudulent claims, such as guarantees to remove a bankruptcy, because nobody can remove a legally filed bankruptcy. An alternative to a repair company is a nonprofit credit counselor. The U.S. Department of Justice has authorized counselors for bankrupt individuals, which might offer the same services as a credit repair company, but for far less money.