As distinct from credit counselors or debt management programs, which offer guidance on improving your credit through better financial management, credit repair organizations offer to remove negative information from your credit report. You may have seen advertisements from a credit repair company claiming that they can wipe away your bad credit record and give you a new credit identity. Or, they promise to remove negative items from your credit report and boost your credit score.
Typically, you can recognize an offer from a credit repair company through these three steps:
- They request that you forward them copies of your credit reports
- They make recommendations as to which items you should dispute with the credit bureaus
- They offer to contact the credit bureaus on your behalf to dispute questionable items on your credit record. They charge a fee for this service, sometimes making promises to do better than you would yourself.
But what qualifications do these credit repair organizations have? The truth is, they are not any more qualified to contact the credit bureaus than you are. If you simply contact the credit bureaus yourself, you will likely accomplish more on your own than you can with these sort of credit repair companies. Nothing is going to legally remove accurate information from your credit report, and if the information is inaccurate, you can remove it yourself without a fee and without relying on intermediaries.
However, if you simply do not want to spend the time it takes to repair your credit and would rather hand it over to one of these agencies, you should be aware of your rights and shop carefully for a reputable credit repair organization. In 1996, the Credit Repair Organizations Act (CROA) was enacted to protect consumers from unfair or deceptive business practices by credit repair organizations. Under law, a credit repair company must provide you a written contract with a detailed description of specific services to be performed, and payment terms, including their total cost. They also cannot:
- Make false claims about what they deliver (i.e, “100% success rate”).
- Charge you before their service has been completed.
- Begin working until you have signed a written contract and completed a three-day waiting period. If you cancel the contract before the waiting period expires, you do not have to pay any fees.
For the full text of the CROA and more information, you may consult the Federal Trade Commission website.