Is credit repair legal?

Many people are wary of credit repair agencies and it is understandable why they are. There are many organizations that pose as credit repair agencies but do nothing. So the question “Is credit repair legit?” is a good question and the answer is yes, just make sure you are looking for the right company.

Credit repair is a much bigger industry than many Americans realize. In any given major city, there are dozens, if not hundreds of companies that claim to help you boost your credit. Even if you don’t live in a big city, there are many regional and national companies that will help you monitor and repair your credit history. So there are a multitude of options. Just make sure you choose the right one.

What is Credit Repair?

Credit repair is a broad term that encompasses a set of strategies used to help people who have negative items, such as defaults, on their credit report. Generally, it is used to remove these items from your report, which will make your credit history cleaner and increase your credit score. Depending on the type of negative ratings and the owner of that debt, some credit strategies are extremely effective and some simply won’t work no matter how hard you try. In this industry, there is no legal way to always get results, but some companies are much better than others.

Is credit repair legit?

Credit repair is legitimate, but not every agency that promises to help you can or will help you. Don’t take my word for it, though. There are plenty of good companies that do this kind of work all the time, so when researching potential companies, check their previous customer reviews and see if they have a Better Business Bureau or Trustpilot rating. Even if you don’t, there are other ways to separate the best companies from the crowd.

How to tell if a credit repair agency is good

Besides checking their past reviews, there are several ways to tell if a credit repair agency is generally effective. Before signing a contract or sending a payment, be sure to do your due diligence beforehand. If you don’t know what to look for, don’t worry, we’ve got you covered. You should always check and ask about the following for any credit repair agency you are considering.

Credit Repair Organizations Act (CROA)

Under the CROA, you have certain rights as an individual when it comes to credit repair agencies. If a company tries to violate any of these rights, you should walk away immediately, because most of the time they won’t be effective at anything other than taking your money away. Here is a list of some of the rights granted to you by this law.

  • Upfront charges are not allowed: Monthly fees, commissions, etc. You may be billed, but you cannot be billed without work being done and you must be told what that work is.
  • Misleading advertising is not allowed: Any company that promises a score change is going to do something illegal. Don’t hire any agency that makes promises about your score. This is different from companies that advertise the “average score change”.
  • You cannot be asked to waive your rights: If you are given a document or if you are asked to sign a declaration that waives one of your rights, do not comply with it. Some companies don’t know that they are not allowed to request this, but in any case, your CROA rights cannot be removed.
  • You cannot be asked to create a new identity: There are companies whose solution is to register you and use a separate SSN or EIN. DON’T DO THIS. This is highly illegal and considered identity theft.

What’s in the contract?

You should always read what is in the contract before signing it. This applies to everything in life, but especially in situations where you give the company the right to act on your behalf with quite a bit of personal information. Make sure you disagree with anything you don’t want to agree with and if there’s anything in there you don’t like, ask for it to be removed from the document. Also, make sure nothing in the document conflicts with the CROA.

Are they transparent?

The best credit repair organizations are completely transparent. Under the Fair Credit Reporting Act (FCRA), companies must tell you that what they do can also be done by you. However, the professionals at these companies will do a better job than the average person of getting the negative marks removed. Make sure that the company you choose not only follows the guidelines set by the FCRA, but is also open about the fees they charge, the results they expect, their track record, etc. The more information a company is willing to give you, usually the better they are, but it will also always give you the best information to make the best decision, overall.

Credit repair is completely legal and a legitimate way to help people with bad credit. Unfortunately, not all agencies follow the law, so it’s up to you to check the organization carefully. Fortunately, there are plenty of consumer protections in the industry, so as long as you do your due diligence, you’ll be safe and hopefully better off with a higher credit score.

If you want to find legitimate credit repair services, we also recommend the best credit repair companies.

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