1. Finance
  2. Debt Management
  3. Credit Repair Companies
  4. Credit repair vs. credit counseling

Credit repair vs. credit counseling

Short-term fix or long-term solution

Author picture
Written by
Author picture
Edited by
woman talking to a credit counselor

Although managing your daily budget and improving your credit score are things you can do on your own, sometimes we all need a little help.

Credit counseling agencies and credit repair companies are two third-party options you can use to help improve your personal finances. But while they might sound similar in name, they are quite different in what they can offer.

Key insights

  • Credit counseling provides personalized advice to help you manage your money.
  • A credit counselor can help you create a budget or a debt management plan.
  • Credit repair is the process of trying to get negative information taken off your credit reports. You can do this yourself or hire a company to help you.
  • A credit repair company can only attempt to remove inaccurate information from your credit reports.

How does credit counseling work?

The goal of credit counseling is to help you create a sustainable budget and plan so that you can make better money choices in the future, explains Shanté Nicole, a certified credit consultant and founder of the website Financial Common Cents.

A counselor can help you with:

  • Budgeting
  • Managing debt
  • Negotiating more favorable terms with creditors

If you have a lot of high-interest debt, your counselor might suggest a debt management plan (DMP) to pay down your debts.

With a DMP, the counselor negotiates with creditors on your behalf to reduce your interest rates or extend the amount of time you have to repay your debts. A DMP allows you to combine several different debts into a single monthly payment, and you can typically pay off your debt within three to five years if you stick to the DMP.

Credit counseling costs

“The cost of credit counseling can vary depending on the organization providing the service and the complexity of an individual’s financial situation,” said Shanté.

Most credit counseling agencies are nonprofit, which enables them to provide services for free or for a nominal fee. They may even offer reduced or waived fees for clients who can’t afford to pay.

Shanté noted that for-profit agencies “may charge higher fees, which can be based on a percentage of the debt being managed or a flat monthly fee.”

Costs can also vary by state. For instance, in California, monthly fees charged for a DMP are capped at either $35 or 8% of the monthly amount paid to creditors, whichever is less. An education and counseling fee of $50 can also be charged.

Pros and cons of credit counseling

Credit counseling can be a great way to tackle debt and take control of your finances. But there are some considerations to keep in mind.


  • Credit counselors can help you make long-term changes to your financial habits.
  • Working with nonprofit credit counselors allows access to free counseling.
  • A DMP consolidates debts into one monthly payment and may reduce interest.


  • A credit counselor can show you how to manage your debt, but you need to do the work.
  • DMPs usually have setup and monthly fees.
  • Creditors might not agree to negotiate with your credit counselor.

How does credit repair work?

Credit repair is the process of trying to get negative information removed from your credit reports. While it is entirely possible to repair your credit on your own, there are credit repair companies that will do it for you for a fee. A credit repair company will look for any errors in your reports and then contact the credit bureaus to request that the errors be removed.

Some credit repair companies have historically exaggerated their abilities to improve clients’ credit, which is why the Credit Repair Organizations Act (CROA) came into effect. Among other things, the CROA prohibits credit repair companies from misrepresenting their services and demanding advance payments from customers.

If you’re trying to improve your credit score, a credit repair company might sound like an easy fix. But unless there is information in your credit report that you believe is incorrect, it’s unlikely that a credit repair company’s services can help improve your credit score. A credit bureau isn’t obligated to remove negative but accurate information from your credit report, no matter how much pressure a credit repair company might apply.

» MORE: 9 ways to improve your credit score

Credit repair costs

Credit repair companies often charge a one-time setup fee of around $50 to $200, as well as a monthly fee that typically ranges from about $50 to $150 or so. It can take anywhere from three to six months to resolve multiple credit report issues, so a completed credit repair service could potentially cost more than $1,000.

Pros and cons of credit repair companies

Hiring a credit repair company can feel like an easy option, but there are some pros and cons to consider.


  • Having someone else review your credit reports saves you time and stress.
  • If the credit repair company identifies legitimate errors, you’ll have help removing that negative information from your report(s).
  • It might make financial sense to outsource a credit report dispute to a third party, depending on the dispute’s complexity.


  • The Federal Trade Commission warns of numerous credit repair scams.
  • You’re paying for a service you can do yourself.
  • There is no guarantee that your credit will be repaired. If there are no errors in your report, there’s nothing to fix.

The difference between credit counseling and repair

An important difference between credit counseling and credit repair is that credit counselors typically hold specialized certifications and have undergone specialized personal finance training, explains financial educator Matt Paradise. This allows credit counselors to assist clients in debt management and budgeting.

“Counselors discuss your financial situation with you and help develop a personalized plan,” he said.

On the other hand, the goal of credit repair companies is to “get negative credit information deleted from credit reports or change it to be more favorable to the consumer,” said Paradise. He warned that consumers considering paying for credit repair services should “be careful, as the credit repair industry is full of fraud.”

Ultimately, the task of disputing errors on your credit report doesn’t require any specialized skills or training; it just takes time and effort. It’s something you can do on your own.

» MORE: How to choose a certified credit counselor

Which should you choose?

Choosing to work with a credit counselor or a credit repair company should be informed by your goals and what you hope to achieve.

  • A credit counselor provides a holistic approach to helping you improve your personal finances. If you are struggling to manage your money and pay off debt, a credit counselor can provide tools and knowledge to help you get back on track.
  • A credit repair agent will only assist you in trying to dispute errors on your credit report. If your primary goal is to improve your credit score and you want someone else to take the lead on reviewing your reports for errors, a credit repair company might make sense.

Take a Financial Relief Quiz. Get matched with an Authorized Partner.


    Is credit repair legal?

    The process of credit repair is legal. The CROA is a federal law that regulates credit repair agencies and outlines what they can and cannot do.

    What can credit repair remove?

    A credit repair company can dispute any errors or fraudulent information found in your credit reports.

    How fast does credit repair work?

    The amount of time that credit repair takes depends on several factors, including the type and amount of negative information in your credit reports. Negative information can stay in your report for up to 10 years, depending on its severity. If you are disputing false information, it can take around a month to six months to resolve, depending on the number and complexity of the errors.

    Does credit counseling affect your credit score?

    Simply meeting with a credit counselor will not affect your credit score. But depending on the actions you and your credit counselor decide to take (such as implementing a DMP and/or closing accounts), it’s possible your credit score might be affected.

    What hurts your credit score the most?

    Payment history accounts for the largest portion of your credit score, which means late or missed payments can cause considerable damage. But filing for bankruptcy might be the single most catastrophic action for your credit score; a bankruptcy can cause a very high score to drop up to an estimated 240 points.

    Bottom line

    While credit counseling and credit repair are both designed to help you improve your financial situation, they don’t have much in common. A credit counselor is trained to help you better manage your personal finances and debt. If you apply the tips and tools you acquire from a credit counselor, it’s possible to significantly improve your financial situation in the long term. But it takes work.

    A credit repair company won’t help you create a budget or figure out how to save for your first home. Credit repair is focused solely on trying to rid your credit reports of errors. Disputing a credit report is something you can do independently, but some people choose to hire a credit repair company because they want assistance or don’t have the time to do it themselves.

    ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
    1. California Department of Financial Protection and Innovation, "Check Out Your Credit Counseling Agency." Accessed April 11, 2023.
    2. Federal Trade Commission, "Credit Repair Organizations Act." Accessed April 11, 2023.
    3. Experian, "How Long Do Credit Report Disputes Take?" Accessed April 11, 2023.
    4. Federal Trade Commission, "Fixing Your Credit FAQs." Accessed April 11, 2023.
    5. Debt.org, "How Bankruptcy Impacts Your Credit Score & How to Recover." Accessed April 30, 2023.
    Did you find this article helpful? |
    Share this article