How Credit Repair Works

Repairing your credit is a task that can seem daunting and next to impossible. At Credit Repair Ninja we’re here to educate and empower consumers to take control of their credit score.

The credit repair process takes time and patience. The complexity of the process is why most people hire out the process of their credit repair. At Credit Repair Ninja we have learned the most efficient tactics to help someone improve their credit score. In this guide, we explain how the credit repair process works.

Your Credit Score

A credit score is a number in the range from 300 to 850. The number gets calculated based on the information found on your credit report.

Lenders and other financial institutions will use this information to establish your credit worthiness. The most common scenarios you will have your credit score evaluated is when:

Applying for a Credit Card

For most people, this is the first step to building your credit score.


A landlord or rental company will often check your credit before you can sign a lease agreement. They typically want to see a good record of your financial history. While having a bad credit score may not prevent you from getting an apartment, it may limit your options.

Applying for a Mortgage

Underwriters check your credit report to decide if you meet the risk profile to qualify for a loan. Your score may also factor into the rate offered to you on a mortgage.

Buying a Car

The car Salesman or bank will use your credit score to determine what rate you can get an auto loan.

The History of FICO

FICO started in 1956 to help businesses make better decisions using math and computers.

Originally called the Fair Isaac and Co., they invented the credit scoring industry. Their crowning achievement was the development of the FICO score algorithm. This algorithm assigned each consumer i.e. “you” a score based on their financial history.

The invention of the credit score was a huge upset to the financial industry. It allowed companies to make creditworthiness decisions based on consumer history. No longer did you have to have the traditional “suit and tie” look that bankers looked for in an applicant.

With the FICO score lenders can look beneath the surface of an application. FICO score is a win because it allows businesses to make creditworthy decisions based on data. It’s also a win for consumers as they get fair and transparent judgement of their credit.

This score gets calculated based on a record of a consumer’s behavior.

What Makes up your Credit Score

Five major factors get looked at in the calculation of your credit score.

1. Payment History

Payment history is the factor with the most weight when it comes to calculating your credit score. This factor makes up roughly 35% of your credit score. A missed payment can result in a derogatory mark on your credit, if not taken care of right away.

2. Amount Owed / Debt to Credit Ratio

The money you owe to creditors vs. the credit you have available is called your credit utilization ratio. It’s recommended to use only 30 percent of the credit you have available. For example, let’s say a credit card company extends you a credit card with a limit of $5000. You’ll want to keep the balance on that card under $1500.

3. Length of Credit History

The length of your credit history is the next biggest factor in your score calculation. Credit history is an average length of time credit accounts have been open on your account.

4. Credit Inquires

Every time you apply for a mortgage, new credit card, or any other time your credit score gets pulled. A new inquiry gets recorded on your credit report. These hard inquiries get recorded every time an institution or “data furnisher” pulls your credit.

5. Derogatory Remarks

These negative marks on your credit have a significant impact on your score, and it’s also where you’ll have the most room to make a positive impact on your score right away.

These negative marks can end up on your credit for several different reasons, but the most common are:

  • Late payments
  • Delinquent Accounts
  • Public records
  • Federal/State Liens

The Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA) protects the rights of consumers. It’s this law that makes the credit repair industry possible. This act gives consumer’s the right to dispute item’s on their credit report believed to be questionable or incorrect.

There are many reasons these wrong items can end up on your report. Identity mix-up or a failure of a creditor/financial institution to update their records are most common.

Part of the FCRA allows a business or credit repair company to dispute these items on your behalf.

Your Rights under the Fair Credit Reporting Act​

From the FTC Website:

“The federal Fair Credit Reporting Act (FCRA) promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies. ”

Here is a summary of your rights under the Fair Credit Reporting Act

1. You must be informed if the information in your credit file gets used against you.

This right entitles you to be told when anyone used a credit report to take adverse action against you. For example, if you apply for a mortgage and you get denied because of your credit history. The bank must give you the name, address, and phone number of the credit bureau from which they received the report.

2. You have the right to know what’s on your credit report.

This right allows you to request a credit report for free under any of the following scenarios:

-Someone has taken an adverse action against you because of information found on your credit report.
-You have had your identity stolen, and a fraud alert gets placed in your file.
-Your file has inaccurate items as a result of fraud.
-You are on Government/public assistance.
-You are currently unemployed, but you are planning to apply for employment withing the next 60 days.

In 2005 the FCRA was updated to entitle everyone to receive a free credit report. You can request a free credit report once every 12 months, from all three major credit bureaus. (Experian, Transunion, & Expedia.)

3. You have the right to ask for your credit score

Your FICO score is the number that gets calculated based on the information on your credit report. You can request this score from the credit bureaus. You may have to pay to get this score, but in some financial transactions, this score will be provided to you at no cost.

4. You have the right to dispute inaccurate information

This right is what makes credit repair possible.

You can dispute any of the items on your credit report you think are wrong or incomplete. The agency must then investigate your dispute to determine if it is valid/(frivolous) information or not.

5. Credit reporting agencies MUST delete inaccurate information

When you dispute an item, the credit reporting agency has 30 days to investigate the claim. If the item is verified to be inaccurate, incomplete, or unverifiable, the agency must then remove the item from your credit report. But, if the reporting agency determines the item in dispute is accurate, they may continue to report it.

6. Consumer Reporting Agencies must remove old negative items

A credit reporting agency must remove any negative items older than seven years off your credit report. This rule is ten years for bankruptcies. But, there are no guidelines about the least amount of time an item “must” remain on a credit report. This guideline is the reason you can get the most negative items removed from your credit report.

7. You have limited access to your file

A credit bureau can only provide information about to you people/organizations with a valid need. For example your loan officer or landlord.

8. Consent for a report to be provided to employers

An employer/potential employer must have your written authorization to check your credit report.

9. You can opt-out of prescreened offers

Those huge stacks of credit offers you get in the mail are the result of the information found on your credit report.

You can opt out of these offers by calling the number on the offer. You can also opt out of these offers with the nationwide credit bureau’s by calling 1-888-567-8688

10. You’re entitled to Seek Damages

If a consumer reporting agency violates any of your rights under the FCRA, you may be able to sue and seek damages in state and federal court.

Hiring a Credit Repair Company

It can be beneficial to hire a professional credit repair company to dispute item’s on your credit report for you.

How does a Credit Repair company work?

A credit repair company executes several tactics in an attempt to raise your credit score. A company can’t guarantee your score will increase. But, they can streamline the credit dispute process and save you the trouble of doing it yourself.

The most common form of credit repair is disputing inaccuracies on your credit report.

Many of the top credit repair companies offer a free credit consultation. During the meeting, a credit specialist will review your file to see if you’re a good candidate for credit repair.

A good candidate for credit repair will have items on their credit report that can be disputed. For example,

  • Collections account that’s closed, but the data furnisher didn’t update it.
  • An inaccurate medical bill
  • A debt that belongs to someone with a similar name or social security number.

Credit Dispute Steps

Below is a summary of the steps involved with disputing negative items on your credit file.

1. Review current credit file and get copies of your reports from Transunion, Equifax, and Experian

Here is the contact information for each bureau:

  • TransUnion – P.O. Box 1000. Chester, PA 19022. 1-800-916-880
  • Experian – P.O. Box 2104. Allen, TX 75013-0949. 1-888-EXPERIAN (397-3742)
  • Equifax – P.O. Box 740241. Atlanta, GA 30374-0241. 1-800-685-1111.

As mentioned in your rights under the FCRA you’re entitled to one free credit report every 12 months. To make this easy for consumers, the nationwide credit bureau’s made this website available:

2. After you collect your credit report, you should examine each report for negative items. If any of the negative items are inaccurate or questionable, you can dispute those items.

3. After you have determined there are items that you can dispute on your credit report, you have a few options.

Option one is to send a dispute letter through the mail. This option is the most common and efficient way to dispute your credit. When sending your dispute letter to a credit bureau be sure to include the following elements:

-Your Name, Address, & Contact Information
-The Item in question you are disputing
-Send copies of any documents that support your case
-Two forms of valid ID (SS Card, Driver’s License, Paystubs, W-2, or Utility Bill)

Be sure to send your letter using certified mail and request a return receipt. This receipt will be an accurate record the credit bureau received your dispute.

Option two involves using online portals to dispute negative items. This method works, but you’ll have a better chance sticking to the writing letters. When disputing online, you waive some of the rights that protect you under the FCRA.

Transunion –

Experian –

Equifax –

Option three is to dispute these items over the phone. If you decide to take this route, it’s recommended to record your phone calls. These recordings will serve as a record of your dispute.

credit repair ninja - dispute checklist

Credit bureaus investigate

After the credit bureau receives your report, they will make a determination if your dispute is valid.

The Credit Bureau’s then determine if your dispute is valid. All legitimate disputes get further investigated. The bureau will reach out to the data furnisher to verify the item in dispute. This process will take up to 30 days. If the bureau does not hear back from the data provider, the item in dispute must be removed from your credit report.

Debt Validation

If all goes well the item in dispute gets removed. But if the credit bureau hears back from the lender that the debt is correct, they will mark the item as verified. If you still think the item in question is inaccurate, you can request a debt validation. This request requires the data furnisher to send back legal documentation of the item. If proof is not provided, the item will get removed.

Most Common Credit Repair Strategies to Avoid

There are many strategies companies can use to help you fix your credit score. You should be aware of these common strategies, so you don’t end up hiring a credit repair company that does more harm than good.


Piggybacking is when a person with an existing credit account adds you as an authorized user. This strategy increases your average credit history and decreases your credit utilization.

You can convince a close friend or family member to add you as an authorized user to their account. You can also find marketplaces where strangers sell user spots on their credit accounts.

Credit reporting agencies have tried to convince people this strategy doesn’t work. There are still companies using the piggybacking strategy to help their clients boost their score. It while likely continue to work for the foreseeable future. It’s quite the process to change the algorithm at FICO that calculates your credit score.


The jamming strategy became popular in the early creation of the credit repair industry. Jamming happens when a credit repair company overwhelms a reporting bureau by disputing every item on a credit report.

These companies send multiple letters disputing the “same” item. Even when they know, the items in dispute are accurate debts.

The credit repair companies are hoping the dispute will slip through the cracks.

If the review is not complete within 30 days, the item will get removed from the credit report.

The problem with jamming is credit repair companies were disputing all items on a credit report, both accurate and inaccurate.

This strategy does work, but only temporarily. As most lenders report every 30 days, and if the item was accurate it ends up back on the credit report.

File Segregation

File segregation is when credit repair companies help consumers apply for an EIN number. Consumers then use this EIN number in place of a social security number when applying for credit.

Businesses use an EIN number when applying for business credit. It should never get used in place of your social security number.

This practice is highly discouraged. Worst case scenario you end up in jail under fraud charges. You can be charged with both federal wire fraud and civil fraud.

Using a Credit Repair Company

While it’s true, that under the FCRA you have the right as a consumer to dispute your credit file yourself, it’s often more effective to hire a professional company.

Evaluating the cost / is it worth it?

Deciding whether a credit repair company is worth it or not depends on your context. A credit repair company is going to take 6 – 12 months to remove inaccurate items on your credit report. The average credit repair company charges anywhere from $99-$200/month.

Having bad credit can end up costing you thousands of dollars more than if you have good credit.

Here’s a simple breakdown to illustrate my point.

Let’s say you want to buy a new house for the amount of $225,000

You have a $20,000 down payment, so you apply for a 30-year mortgage of $200,000.

Because of your poor credit score, the loan officer comes back to you with a rate of 5.5%. This rate makes your monthly payment $1278.

Suppose you had good credit, and the loan officer came back to you with a rate of 3.5%, your payment would be $1010. Over the life of your loan, this is a saving of $96,480.00

If you ended up paying $1000 in the next 12 months to fix your credit to apply for a mortgage the savings can be humungous.

How to pick the right credit repair company

When considering hiring a credit repair company, there are several factors you should consider.

1. Cost

Price seems to be all over the place in the credit repair industry. Some companies charge an upfront fee and an additional fee for every negative item removed.

The other and more common pricing structure is a monthly fee. The fee is charged until your credit file has all inaccurate items removed or until you cancel your monthly membership.

2. Time to get results

It’s a good idea to ask the credit repair company how long they take to get results. As a general rule, most businesses should be able to get results within six months. The time it takes to get results on your credit file is going to vary based on how many inaccurate items there are.

3. Methods

As mentioned before, the most effective form of credit repair is disputing inaccurate items on your credit file. If any of the companies you’re researching mentions other methods like jamming and file segregation, you’ll want to stay far away.

How long does it take to get results

Here’s a rough breakdown of what to expect from a legitimate credit reporting company.

Days 1-5

Under the FCRA a credit repair company must disclose the work they are going to be performing on your credit file up front. They can not charge you until they have educated you on your rights as a consumer and gone over the contract.

Days 6-30

This phase is where the brunt of the work on a credit file happens. Credit repair companies will go to work on your credit file by reviewing your reports with you and disputing items you believe to be inaccurate. The three leading credit bureaus will have 30 days to investigate the initial disputes.

Days 30 +

After the results from the initial round of disputes come back in, The credit repair companies will attempt to dispute items you believe to be inaccurate for a second round. This process will continue until all items are removed, or the credit repair company has exhausted their efforts.