Is Credit Repair Illegal?
Credit plays a big role in your life. You may not realize how important credit is until you become an adult. There are only a few bad moves to damage your credit score, which makes it difficult to get approval for credit cards, car loans, and other credit-related services.
You may want to consider hiring a credit repair company to get your credit back on track. These companies work with the credit bureau on your behalf to try to remove some negative information from your credit report and increase your credit score. While credit repair is a legal industry, there are specific federal guidelines that regulate what companies can and cannot do.
What is Credit Repair?
Credit repair is the process of rebuilding your credit and improving your credit score when it has been damaged by bad credit habits, financial failures, identity theft, or credit reporting errors. Although offering fake credit repairs is a favorite trick of scam artists, the process itself is legal. There are legitimate credit repair companies that can help you, and you can take steps to repair your own credit.
What methods of credit repair are illegal?
The Credit Repair Organizations Act (CROA) is a federal law that outlines what credit repair companies can and cannot do.
Upfront charges
Credit repair companies cannot charge you. You should only pay after performing credit repair services. Many credit repair companies take advantage of this by offering subscriptions that allow you to pay each month for the services performed in the previous month. Another popular pricing model is “pay-per-delete”. If called you pay the credit repair company for each item deleted from your credit report.
Misrepresentation of services
Credit repair companies cannot lie about the services they provide to you, including promising to remove accurate information from your credit report or guarantee certain results. Credit repair companies are not allowed to lie to the credit bureau either. They cannot dispute accurate information under the pretext that information is a mistake.
Illegal advice
Credit repair companies cannot promise or ask you to create a new identity to help you hide information on your credit report.
Note: Credit repair companies cannot ask you to waive your rights through consumer protection laws. Anything you sign that relinquishes your rights is invalid.
Understanding your rights protects you from scams and illegal credit repair tactics. If you believe that your credit repair company has broken the law in dealing with you, you have the right to sue the credit repair company for violating your rights under the CROA.
Are Credit Repair Services Legal in Every State?
Credit repair is legal in every state with one exception: Georgia, where, in general, it is illegal to run a credit repair business. Civil penalties, including compensation to the victims and fines to the state, can be applied against companies violating the law.
How to repair your credit without hiring anyone?
If you want to save money, you can repair the credit on your own with little time and effort. Get started by getting a copy of your credit history, then scan all of your accounts for incorrect information, negative marks, and accounts that may not belong to you.
Clear up credit report errors:
Dispute any errors with the credit bureau or directly with the error reporting company. Write a letter explaining the error and send copies of any evidence to support your dispute. You can get your credit reports from all three major credit bureaus for free through AnnualCreditReport.com, so you will only have to pay for mailing.
When you find errors in your credit report:
If you see negative information on your credit report that you think is incorrect, you can challenge it. The FTC recommends writing to the credit bureau, stating what information you are disputing, and attaching photocopies of any relevant documents.
Credit bureaus are legally required to investigate within 30 days unless they consider your claim to be frivolous. The Bureau should also send your letter and documents to the lender (such as the credit card issuer) who provided the information you are disputing. The company is also required by law to investigate the matter and report it to the credit bureau.
If the investigation determines that you are correct, the original lender must notify all credit bureaus that it reported incorrect information so that they can correct your credit reports.
In any case, once the investigation is complete, the credit bureau will have to provide you with the results in writing and will provide a free copy of your credit report if any corrections have been made as a result of the dispute.
If the dispute is not resolved in your favor, it is your right to state that you will include your party to the dispute in your future credit reports. You can also contact individual lenders directly to suppress your case.
For more details, the three major credit bureaus outline their dispute resolution processes on their websites and include online forms that you can use to speed up the process.
Bottom line
Your credit is important, so it’s worth taking a moment to review your credit reports from time to time to make sure the information they contain is accurate. If you find false information that puts you in a bad light, you have a legal right to challenge it, and credit bureaus must investigate. While you can hire a professional firm to help repair your credit, it will not do anything for you that you cannot do for yourself.
