Understand your rights under the Credit Repair Organizations Act
If you are like millions of other Americans, you start off each year with some resolutions in mind. These goals may include such things as losing weight, finding a new job or, yes, improving your credit reports and credit scores.
When it comes to improving your credit reports and scores, one of the most common methods is to take inventory of the information on your credit reports and make an effort to clear away any items that are incorrect, as is your right under federal law. There may also be a temptation to use a credit repair organization to facilitate removal of negative but accurate information.
VantageScore Solutions, at its consumer-education website CreditScoreQuiz.org, advises against hiring any organization that promises a “quick fix” to negative-but-accurate credit file data, on grounds that you, with sound credit habits and some patience, can accomplish anything they can on your own. Nevertheless, it’s your choice whether or not to hire one of these companies. If you do, it’s important to understand your rights regarding their representation and services.
The credit repair industry is governed by a federal law called the Credit Repair Organizations Act (CROA). The CROA encompasses a variety of things, including the characteristics of companies that are considered credit repair organizations, the methods they can (and cannot) use to market themselves to you, and the manner in which they can charge you for their services. Below is a list of protections you enjoy thanks to the Act. If you find a credit repair company that does not follow these rules, it is likely running afoul of the CROA.
constitutes a credit repair organization: Generally speaking, any
company that sells a standalone service which it claims will improve
your credit report, credit history or credit score, and is a for-profit company is likely considered a credit repair organization.
guarantees: A credit repair company cannot guarantee to have any
information removed from your credit reports. So, if you see claims such
as “Remove all collections, 100% guaranteed,” the company in question
is not complying with the CROA.
- Charging in advance of
rendering service: A credit repair company cannot charge its customers
until its services have been fully rendered. So, any company that wants a
deposit or other advance fee is not operating within CROA requirements.
your identity: A credit repair company cannot make any statement on
your behalf or advise you to make any statement that is intended to
alter your identification for purposes of preventing proper display of
your credit report, or attempting to conceal accurate credit
- Explaining your rights in writing: The credit repair company must provide you with a disclosure, in writing, that communicates your rights to dispute information on your credit reports, on your own, and at no cost to you. This should be a lengthy document, and you should review it carefully before agreeing to work with the company.
As explained above, you can challenge information on your credit reports yourself, without hiring anyone. You can obtain free copies of your credit reports once every 12 months at AnnualCreditReport.com, and you can file any credit disputes online.