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Credit repair services are supposed to help people review and fix their credit and also learn healthy credit habits. Unfortunately, the credit repair industry is full of scams that take advantage of consumers. This article will provide warning signs of credit repair scams. Not all credit repair agencies are problematic, so we‘ll also help you understand how to find a quality credit repair service and get the help you need.
Is credit repair legal?
Credit repair is legal, but the industry has regulations companies must follow according to the Credit Repair Organizations Act (CROA). The CROA is a federal law that protects consumers by defining what agencies can and can’t legally do when providing credit repair services.
If a credit repair agency obeys the CROA regulations, then it’s a legitimate business that aims to help people fix their credit. Individuals hiring credit repair services must give their legal consent for potential fees, access to credit reports and more.
What can a credit repair company legally do?
Credit repair can be confusing, and most people have questions about what credit repair companies may ask about or require from them. Let’s take a look at the rules and regulations the credit repair industry must abide by.
Can a credit repair company ask for payment?
Credit repair companies can ask for payment for services that have been completed. Companies that ask for payment before you have signed anything or refuse to provide evidence of work being done, could be a potential scam.
Some credit counseling organizations may offer credit help services at little to no cost, but these organizations don’t replace credit repair companies.
Does a credit repair company need your SSN?
A credit repair company may need your Social Security number (SSN) to access all your files. Make sure you do your due diligence first and feel you can trust the company before providing your SSN. You can ask why they need it, and you should receive a straightforward answer that is easily understood. You need to be cautious because some credit repair scams involve selling your SSN illegally.
Lastly, if a company suggests you take on a new SSN, note that this is illegal and shows you’re being scammed.
Is it possible to guarantee credit repair results?
It’s illegal for a credit repair company to tell you they can guarantee repair results. Ultimately, no company can promise this because these companies have no control over your credit score. Even if you file a legitimate dispute, there’s still a possibility the credit bureaus will deny your claim.
Is it legal to pay someone to repair your credit for you?
Credit repair organizations are a legal, legitimate service, so hiring someone to repair your credit for you is perfectly legal. When using a credit repair company, the organization must provide you with a contract that clearly outlines the services that will be provided, the potential fees and the possible outcomes.
Warning signs of credit repair scams
There are some common—and clear—warning signs of credit repair scams you should watch out for.
They make guarantees about improving your credit score
As mentioned above, these organizations don’t have control over the outcome, so they can’t make guarantees about improving your score.
Sometimes, they’ll go so far as to promise you a “new credit identity.” This illegal approach can get both you and the agency in trouble.
Watch out for agencies that:
- Promise results
- Suggest setting up a new SSN to “start fresh”
They avoid explaining what you’re legally entitled to
Under the CROA, all credit companies must inform you of your legal rights and detail them in the service contract. All agencies must make it clear to you that you can perform the services offered yourself. Under the Fair Credit Reporting Act (FCRA), consumers can access their own credit reports, review them and file disputes. You don’t technically need a credit repair agency for these steps—although they can take the work off of you. Another critical legal right is that you can cancel a credit repair contract within three days of signing, for any reason.
Outlining your legal rights helps you understand what you’re getting into, what you’re paying for and what you can expect.
If you’re about to sign with a credit repair agency and at no point do they go over your legal rights, this is a clear sign to walk out the door.
They tell you to not contact credit reporting agencies
Credit repair agencies shouldn’t be discouraging you from contacting credit reporting agencies. The concern here is that you may try to do the work yourself, be successful and not have to pay them for their services. A good credit repair agency won’t have an issue with you trying to learn and fix the problem yourself because they genuinely want your credit to improve—regardless of who fixes the problem.
How to report credit repair scams
If you’ve fallen victim to a credit repair scam, you can report the agency. Individual claims should be filed with your local consumer affairs office or the state Attorney General.
You may also consider filing a report with the Federal Trade Commission (FTC). The FTC won’t resolve individual instances, but they may take legal action if they notice a pattern from an agency.
How to protect yourself from credit repair scams
The CROA protects consumers seeking credit repair services. Understanding your rights under the CROA can help you quickly spot agencies that are operating illegally.
The most significant protections under the CROA are that credit repair agencies can’t:
- Make misleading or untrue claims about the results of their services.
- Make false statements about a consumer ‘s credit profile to the credit reporting agencies or encourage consumers to lie about their own credit profile to credit reporting agencies.
- Ask for advance fees for services not yet completed.
- Practice any fraudulent activities.
- Suggest or attempt to alter the consumer’s identity to improve or refresh their credit profile.
- Be banks, credit unions or credit card issuers.
How to find a legitimate credit repair company
When considering credit repair companies, you can verify their legitimacy by:
- Looking at reviews online
- Contacting your state attorney general’s office and the Federal Trade Commission (FTC) to see if the agency has any existing complaints against it
Can I do it myself?
Yes, you can attempt to do credit repair yourself. Get your free copy of your credit report from each of the credit bureaus. Examine each one and see if you can find any inaccurate or false information listed in your negative items. If you find a discrepancy, you can file a dispute with the credit bureaus. Tackling credit repair yourself might be time-consuming, but it’s also free!
What can a credit repair company do for me?
The right credit repair company can help you in two ways: by being with you every step of the way and by offering its expertise.
Firstly, you may not want to spend hours combing all your credit reports to look for discrepancies. A credit reporting agency will do this work for you so you can concentrate on other priorities in your life.
And secondly, if you do have a legitimate dispute to file, the credit repair agency can make sure it’s filed well. As these agencies file disputes every day, they know what information the credit reporting bureaus need to consider a dispute. Making an error on your dispute can only delay the whole process and the improvements to your credit.
CreditRepair.com is a reputable agency that can help you review and dispute the items on your credit so your credit profile is an accurate representation of your financial history.
Reviewed by Melissa Collins, Credit Consultant at CreditRepair.com.
Melissa Collins is a CXRF Advocate who has been with the company since October 2018. Melissa started as an advisor in member services assisting members with general credit questions, quickly moved to a position helping members with overdue balances. For the past year Melissa has been a part of the CXRF Team resolving escalated situations and creating a better member experience.
Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.
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