Credit repair organizations have aquired a negative reputation over the years because so many of them engage in dubious activity which often veers into the illegal and certainly the unethical. It is very tempting for debt ridden consumers and those with poor credit histories to be tempted by such services which often make bold promises to clean up credit reports and wipe out bad records. Many such companies are very common on the Internet, for one.
Legal activists point out that credit repair organizations are generally to be avoided. Beyond the problem of their questionable practices, there is nothing these companies can legally do which the consumer cannot do for themselves. It is certainly cheaper to do these yourself given that credit repair companies often charge very high fees for their services.
There are a number of steps to take if you insist on using such companies. There are also a number of laws governing the activities of their activities which you should be aware of. If you decide to correct your credit problems by yourself, begin by visiting our Fix Your Own Credit Problems page. It contains a relevant document from the Federal Trade Commission.
In 1996, Congress passed the Credit Repair Organizations Act to protect consumers from abuses by these companies. The act mandates the following:
Credit Repair Organizations may not falsify a consumer's credit record or present deceptive information regarding a customer's credit history to any credit agency or credit provider.
They may not receive payment for promised services until those services have been performed.
The contract between the credit repair organization and the consumer must be in written form, fully itemized, with specification of dates of expected completion of services. It must be dated and must have the signature of the customer.
The law also mandates that the following statement be made available in written form to the consumer advising them of their legal rights:
You have the right to dispute inaccurate information in your credit report by contacting the credit bureau directly. However, neither you nor any other credit repair company or credit repair organization has the right to have accurate, current and verifiable information removed from your credit report. The credit bureau must remove accurate, negative information from your report only if it is over seven years old. Bankruptcy information can be reported for 10 years.
You have the right to obtain a copy of your credit report from the credit bureau. You may be charged a reasonable fee. There is no fee, however if you have beeen turned down for credit, employment, insurance or rental dwelling because of information in your credit report within the preceding sixty days. The credit bureau must provide someone to help you interpret the information in your credit file. You are entitled to receive a free copy of your credit report if you are unemployed and intend to apply for employment in the next sixty days, if you are a recipient of public welfare assistance or if you have reason to believe there is inaccurate information in your credit report due to fraud.
You have the right to sue a credit repair organization that violates the Credit Repair Organizations Act. This law prohibits deceptive practices by credit repair organizations.
You have the right to cancel your contract with any credit repair organization for any reason within three business days of the date you signed it.
Credit bureaus are required to follow reasonable procedures to ensure that information they report is accurate. However, mistakes may occur.
You may on your own, notify a credit bureau in writing that you dispute the accuracy of information in your credit file. The credit bureau must then reinvestigate and modify or remove inaccurate or incomplete information. The credit bureau may not charge any fee for this service. Any pertinent information and copies of all documents you have concerning any error should be given to the credit bureau.
If the credit bureau's investigation does not resolve a dispute to your satisfaction, you may send a brief statement to the credit bureau explaining why you think the record is inaccurate. The credit bureau must include a summary of your statement about disputed information with any report it issues about you.
The Federal Trade Commission regulates credit bureaus and credit repair organizations. For more information contact:
The Public Reference Branch
Federal Trade Commission
Washington, D.C. 20580
If you choose to use a credit repair organization, follow these steps to protect yourself from fraud:
Investigate the company and make sure it is reputable and that it does not have any outstanding complaints launched against it. The Better Bussiness Bureau agency in your area is a good resource to investigate such a company. Check the phone book to find an office near you.
Ask for references. Follow up on these references by calling past customers and finding out the nature of services which were performed as well as the duration of the job and responsiveness from the credit repair agency.
Check the itemization of services to be provided and make sure you cannot perform some of these for yourself. For example, a number of common features of credit repair offers include getting you a secured credit card to re-establish your credit, and removing incorrect items from your credit file. These can be done by you with relative ease and far more cheaply.
Make sure that the actions proposed by the repair agency do not include illegal activity such as deletion of accurate but negative information in your credit file. For one thing, this information may only be expunged temporarily and will be restored in short order onto your file when your creditors report the status of your account - as they do periodically.