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Is Credit Repair Legal?

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Many people are wary of credit repair agencies and it is understandable why they are. There are many organizations out there that masquerade as credit repair agencies but do not actually do anything. So the question of “Is credit repair legit?” is a fair question and the answer is yes, just make sure that you look for the right company.

Credit repair is a much bigger industry than many Americans realize. In any given large city, there are dozens, if not hundreds of companies that claim to help you boost your credit. Even if you do not live in a big city, there are plenty of regional and national companies that will help you monitor and repair your credit history, so there are tons of options. Just make sure you are choosing the right one.

What is Credit Repair?

Credit repair is a general term that encompasses a set of strategies that are used to help people who have negative items, such as loan defaults, on their credit report. In general, it is used to remove these items from your report, which will make your credit history look cleaner and boost your credit score. Depending on the type of negative marks and who owns that debt, some credit strategies are extremely effective and some just will not 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 at it than other companies are.

Is Credit Repair Legit?

Credit repair is legit, but not every agency that promises to help you can or will be able to help you. Do not just take my word for it, though. There are many good companies out there that do this sort of work all of the time, so when looking at potential companies, check out their past customer reviews and see if they have a Better Business Bureau or Trustpilot rating. Even if they do not, there are other ways to separate the best companies from the crowd.

How to Tell if a Credit Repair Agency is Good

Other than checking out their past reviews, there are several ways to tell if a credit repair agency is usually effective. Before you sign a contract or send a payment, make sure you do your due diligence beforehand. If you are not sure what to look for, do not worry, we have you covered. You should always check and ask about the following for any credit repair agency that you may be considering.

Credit Repair Organizations Act (CROA)

Under the CROA, you have certain rights as an individual when it comes to credit repair organizations. If a company tries to violate a single one of these rights, you should immediately walk away, because most of the time, they are not going to be effective at anything except for taking away your money. Here is a list of some of the rights granted to you by this act.

  • Upfront fees are not allowed: You can be charged monthly fees, commissions, etc. but you cannot be charged without some work being done and it should be communicated to you what that work is.
  • Deceptive advertising is not allowed: Any company that promises a score change is going to be doing something illegal. Do not 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 asked to sign a statement that waives any of your rights, do not comply. Some companies are not aware that they are not allowed to ask this, but in any case, your CROA rights cannot be waived.
  • You cannot be asked to create a new identity: There are companies whose solution is to have you register for and use a separate SSN or EIN. DO NOT DO THIS. This is highly illegal and considered identity fraud.

What is in the Contract?

You should always read what is in the contract before you sign it. This applies to anything in life, but especially in situations where you give the company the right to act on your behalf along with quite a bit of personal information. Ensure that you are not agreeing to anything that you do not want to agree with and if there is something in there that you do not like, ask for it to be taken out of the document. Also, ensure that nothing in the document conflicts with the CROA.

Are They Transparent?

The best credit repair organizations are fully transparent. Under the Fair Credit Reporting Act (FCRA), the companies have to inform 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 in actually getting negative marks removed. Make sure that the company you choose not only goes along with the guidelines set by the FCRA but is also open about the fees they charge, the results they expect, their past record, etc. The more information that a company is willing to give you, usually the better they are, but it will also always provide you with the best information to make the best decision, overall.

Credit repair is completely legal and it is a legitimate way to help people with poor credit. Unfortunately, not all agencies will follow the law, so it is up to you to vet the organization thoroughly. Luckily, there are many protections for the consumer in the industry, so as long as you do your due diligence, you will be safe and hopefully better off with a higher credit score.

If you are interesting in finding legitimate credit repair services, we also recommend the Best Credit Repair Companies.

Daniel is a big proponent of how blockchain will eventually disrupt big finance. He breathes technology and lives to try new gadgets.