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Credit Repair, Credit Reports and Scores

An Overview of Credit Restoration and Why It Usually Isn’t Worth the Cost

By Bruce McClary | Friday October 30th, 2020

credit restoration

There are many strategies to pay off debt and to improve your credit score. However, not every strategy is effective, safe, or worth your time and money. Unfortunately, it is not always easy to tell the difference between legitimate and illegitimate strategies. In this post, we will discuss credit restoration, a strategy marketed as a way to improve your credit score quickly. We will take a closer look at how it works, exactly what it claims to accomplish and whether it can be successful.

What is Credit Restoration?

Credit restoration is another term for credit repair. It is unclear why some companies choose to use “credit restoration” in their marketing materials or even their company name, while others use the term “credit repair.” Some companies even use both terms interchangeably. A few companies have tried to make a distinction between their restoration service and a normal credit repair service, arguing that restoration is a more thorough process. After all, the term “restoration” as used in normal conversation does imply an end product that is more polished and returned to normal, as opposed to something that is just “repaired” and made “good enough.”

In reality, though, credit repair and credit restoration are the same thing. Companies are probably only using the term “restoration” to get an edge with their marketing and to appear in more Google search results for the people who may use the terms “restore” and “restoration,” instead of “repair.” And, they are probably trying to avoid the stigma of the “credit repair” label, given the number of complaints and high-profile lawsuits against the industry, including one by the CFPB in May 2020.

Therefore, do not fall into the trap of thinking that a restoration service is going to provide a safer or more legitimate service than a credit repair company. The same warnings about credit repair companies apply to any company marketing itself as a credit restoration service.

Credit Restoration Tactics to Watch Out For

There are bad actors in the credit repair and restoration industry, and you can identify them by a few common red flags. The FTC warns that you are dealing with a scam if the company does any of the following:

  • 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 report — even if 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 they tell you what they can do for you

(The bullet points above came directly from the FTC.)

Perhaps the most important item in this list is the issue of disputing accurate information. If you made a mistake with your credit in the past—and have a negative item on your report that is accurate—you should not try to remove it. A credit repair company may remove it temporarily, but it will come back. Just remember that you should not dispute accurate information—it is not worth the cost, because it will not lead to positive results.

Another good rule of thumb is that if something sounds too good to be true, then it probably is not true! Legally, this can take the form of “deceptive acts and practices.” When a credit restoration company makes promises about quick fixes to your credit score, and that you will experience a significant improvement, they may be breaking the law when they do not deliver on those promises. This was the main issue in the CFPB’s recent suit against a credit repair company. That company had racked up $23 million in fees, all while not delivering on its promises to consumers.

Legitimate Credit Restoration

Are there legitimate credit repair or credit restoration companies? Yes, but that does not mean you should use them.

A credit restoration company can correct errors on a credit report, dispute negative items, and negotiate with some creditors. However, this comes at a cost, typically including a startup fee and ongoing monthly costs. But most importantly, everything that a credit restoration company can do is also within your power to do. Therefore, you could skip the cost and headache of using a service by cleaning up your credit report and building credit on your own.

To do that, simply follow the FTC’s guide for DIY credit repair, and these tips for rebuilding your credit.

Moving Forward

If your credit score is not where you want it to be, remember that you can improve it! Doing so will take time, effort, and energy. Unfortunately, any promise to fix it all overnight is simply untrue. Do not fall for the trap of a credit repair or restoration company that will use illegal or misleading tactics, all while charging you significant fees.

Instead, consider disputing inaccurate information on your own. If you absolutely do not have the time to do it, or do not understand the process, then you might consider one of the legitimate credit restoration companies. However, a better and safer first step would be to speak with a credit counselor who can take a look at your full financial situation and help you make a plan for your debt management and credit goals.

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