Is Credit Repair Really Legal?
Updated February 14, 2018
If you suffer from a low credit score, you should know that credit repair is a viable option to better your financial future. You've probably already heard about how credit repair companies can help, and while some of these claims are legitimate, there are many scam artists in the market that promise results that are too good to be true.
Here at The Credit Review, we want to ensure you gather all the facts before entrusting a credit repair company with your financial future.
Frequently Asked Questions
Is Credit Repair Legal?
Yes, credit repair is legal regardless of your financial situation. An important piece of legislation, called the Fair Credit Reporting Act (FCRA), defines the laws regarding credit history for consumers to protect them.
What Does The Fair Credit Reporting Act Mean For My Rights As A Consumer?
This act allows you to receive a free copy of your credit report once a year at www.annualcreditreport.com. In some states, you are eligible to receive more than one copy of your credit report every year.
The FCRA limits who accesses your credit report by ensuring any inquiries have a purpose, which protects your credit score from being damaged by inquiries. Any unauthorized inquiry can be removed, potentially boosting your credit score by a few points.
It also limits negative items such as inquiries, bankruptcies, and foreclosure to only stay on your credit report for 7 to 10 years. Any inaccurate items that you spot on your report can be disputed well before the 7 years are up.
The FCRA also ensures that if a dispute is filed, the credit bureaus must respond within 30 days to ensure a more accurate credit report for you.
Where Can I Get A Free Credit Report?
In addition to going to www.annualcreditreport.com, there are other situations in which you can obtain a free copy of your credit credit report or purchase it for a small fee. We've compiled and reviewed several companies in the credit monitoring space.
Bear in mind that the scores you receive may not be your exact FICO scores but scores calculated on a similar model called FAKO.
- You are on welfare.
- You are a victim of identity theft.
- You have been turned away for credit, loans, and insurance.
- You have been denied a job based on your credit history.
- You are unemployed and searching for a job.
How Do I Tell The Difference Between A Scam Artist And A Legitimate Credit Repair Company?
If a company asks for you to pay upfront for services, run! Although some companies ask for a “first work fee,” this is usually to acquire your credit reports from the three major bureaus. The CROA has outlined this law to protect consumers by stating "no credit repair organization may charge or receive any money or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform for any consumer before such service is fully performed."
Additionally, a legitimate company informs you that you have the right to fix your credit on your own if you wish. The CROA requires that a written statement called “Consumer Credit File Rights Under State and Federal Law," a statement that is provided to all consumers before any contract is signed.
Be on the lookout for scam artists that try to segregate your credit file and create a new credit identity, which essentially restarts your credit history. If they ask you to get an EIN (Employer Identification Number) or assign you a new social security number, this is a red flag that they are creating a new credit profile for you. This is fraudulent, illegal, and should never be used for personal or financial gain.
Ask your credit repair company what methods they use to improve your credit and avoid any company that sends a dispute letter for everything on your credit history, since this is an ineffective practice.
A lawful credit repair company never disputes and removes accurate information from your credit reports, nor do they promise to remove any information from your reports for an immediate improvement. Any guarantees from a credit repair company on the removal of an item is not truthful because they can only promise to do their best in disputes and deletions. A credit repair company that does not follow these laws is usually shut down very quickly.
Do I Really Need Credit Repair?
If you have checked your credit report and seen any inaccuracies or discrepancies, it may be time for credit repair. While you can do this yourself, it's more efficient to hire an experienced company to search for disputes and do the legwork for you.
How Does Credit Repair Work?
Credit repair companies work with the three major bureaus (Experian, Equifax, and TransUnion) to pull your credit reports and dispute inaccurate information. Erroneous items include late payments, collections, charge-offs, bankruptcy, foreclosure, judgments, liens, and repossessions.
You have a right to an accurate credit report, but only incorrect information can be removed, so collect any paperwork you have to back up your claims.
Can I Repair My Credit Myself?
If you have the time and knowledge to understand the intricacies of credit repair, then that is an option. You can mail dispute letters to all three bureaus or you can make disputes online.
If you are stretched for time and don’t have the resources, hiring a credit repair company to complete the disputes on your behalf may be a better option. Credit repair companies have licensed attorneys and paralegals who understand your rights and can guide you through the entire process.
How Long Does Credit Repair Take?
Credit bureaus have 30 to 45 days to respond to disputes, so small initial improvements can be seen in this time frame. However, each case is unique and the length of time varies per person.
What Are Some Important Laws Associated With Credit Repair?
The Credit Repair Organizations Act requires that a for-profit credit repair company must:
- Inform you of your CROA rights
- Accurately inform you of what they can and cannot do
- Not charge consumers prior to completing services
- Provide a written contract and allow the contract to be canceled within 3 business days of signing
Additionally, each state requires different laws to protect consumers. Some allow you more than three days to cancel a contract or have the credit repair company complete their services in a certain time frame.
What If A Credit Repair Company Does Not Follow CROA Guidelines?
In this case, you can sue a company within five years of their unlawful services.
2018's Top Credit Repair Services
Need professional help repairing your credit report? Our experts have reviewed and ranked the top credit repair services of 2018, rating each based on reputation, BBB grades and overall results.
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