CREDIT LAW

Laws

There are many legitimate credit repair companies in the industry. Unfortunately, like in all industries, there are some companies that are not legitimate or trustworthy. Because your credit score has a big impact on whether you’re approved for credit cards, loans and mortgages, it's important to choose a credit repair company that’s legitimate. You want to find a company that’s transparent, ethical and delivers on its promises.

How Does a Credit Repair Company Work?

Credit repair companies work with you to fix your credit report and improve your credit score. With a legitimate agency, it usually involves four main steps:

  1. Conducting a credit report analysis:
    They review your credit reports from the three main credit bureaus: Experian, Equifax and TransUnion.

  2. Disputing negative items:
    The credit repair company corresponds with creditors and credit bureaus to remove information from your reports that you have indicated you believe to be inacurate.

  3. Managing escalating disputes:
    If an inaccurate item requires more care to remove, the company will manage additional correspondence.

  4. Providing mentoring:
    Fixing your credit doesn't happen overnight. A good credit repair company analyzes your credit score and coaches you toward better credit actions.

The credit repair process takes time, usually a few months at the least. Disputing each inaccurate item on each report takes diligence and follow-up.

While this may seem like a large expense, it could save you much more in the long-run. For instance, over the course of a few years, an improved credit standing could save you money in mortgage, car loan and credit card payments.

Signs of a Legitimate Credit Repair Company

There are legitimate, ethical and honest credit repair companies to turn to when you need help. Here’s how to spot them.

  • Only charge for services after they are provided:
    You'll only pay a trustworthy credit repair company after they've completed a service. Their website and contract should state this in their agreement.

  • You'll only pay a trustworthy credit repair company after they've completed a service. Their website and contract should state this in their agreement.
    A legitimate company will make you aware of this up front in a written statement titled "Consumer Credit File Rights Under State and Federal Law."

  • Never promises to delete accurate information from your credit reports:
    A credit repair company shouldn't attempt to dispute information you feel is accurate. They should work with you to determine the best course of action on your negative items that are inaccurate.

  • Understands the law:
    Because there are many laws surrounding credit repair services, a legitimate company is well-versed in credit legal matters. Not only do they follow the law, they know your rights under the law to work on your behalf.

Signs of an Illegitimate Credit Repair Company

Some credit repair companies engage in questionable practices that are unethical. Here are some red flags:

  • They request payment in advance:
    Credit repair companies should not request payment before services are rendered. Under CROA (Credit Repair Organizations Act), companies cannot collect payment until they have provided services.

  • They suggest that you cannot do credit repair on your own:
    Legitimate credit repair companies will inform you that you have a right to free credit reports each year from the three credit bureaus, and that you’re independently able to dispute inaccurate and questionable items.

  • They advocate that you create a new identity:
    If a credit repair company advises you to create a new credit identity by using an Employer Identification Number (EIN) in place of your Social Security number, this is a serious crime. If a credit repair company suggests this as an option, they are not safe or ethical.

  • They lie about their services:
    Beware of credit repair companies that guarantee to remove negative items—such as bankruptcies and foreclosures—from your credit history. Making guarantees are outside the company's control. It's up to creditors and credit bureaus to remove the negative items.

  • They fail to provide you with a written contract:
    Credit repair companies must provide a written contract before they can perform services. The contract should include terms and conditions, a description of services and your right to cancel without penalty within three business days.

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