Is Credit Repair Legal?

Credit problems and low credit scores often begin as a result of poor judgment or just plain bad luck. It is not uncommon, for example, for a job loss or illness to destroy your once great credit reports and credit scores. Sometimes, however, credit problems occur for other reasons which might not be your fault at all.

Many credit problems are born due to the surfacing of questionable or inaccurate information on your credit reports. An example of such a situation might occur when a creditor is reporting an outstanding balance on an account you previously you paid in full or a perhaps the incorrect reporting of a late payment which never actually occurred.

The bad news, of course, is that credit report problems can still hurt you financially even if your low credit scores and damaged credit reports are the result of inaccurate credit reporting. Thankfully when credit reporting errors do occur you are not without options. The Fair Credit Reporting Act (FCRA) gives you the right to dispute any account which you believe to be incorrect with the credit reporting agencies (CRAs) – Equifax, Trans Union and Experian.

The Legality of Credit Repair

If you have discovered information on your credit reports which you suspect may be incorrect, the FCRA gives you the aforementioned right to dispute these items. These disputes can be handled on your own if you wish. However, there are many consumers who prefer to hire a professional credit repair company to assist them with the dispute process.

First things first, you should know that credit repair is 100% legal as long as a credit repair company follows the law. It is not against the law to operate a credit repair company nor is it illegal for you to hire a credit repair company to work on your behalf. If you have heard otherwise then you have been misinformed.

The Credit Repair Organizations Act

The federal law which defines how credit repair companies must operate in order to remain on the good side of the law is the Credit Repair Organizations Act (CROA). CROA was written to protect consumers from any unscrupulous behavior on the part of credit repair organizations (as they are known in the act). In order for a credit repair company to operate legally it must adhere to these strict regulations:

• No Advance Fees – A credit repair company must perform work on a consumer’s behalf before payment can be legally collected. No payment in advance of services being rendered!
• No Misleading Claims – It is not permissible for a credit repair company to make any misleading or unrealistic promises to consumers (i.e. “We can erase all negative information from your credit!”).
• No Advising Consumers to Lie – It is illegal for a credit repair company to counsel consumers to lie to their creditors or the CRAs in any way.

An Unfair Reputation?

Although we have established that compliant credit repair can be completely legal there is no denying the fact that the credit repair industry still has a bad reputation. One of the reasons why credit repair is often viewed in such a bad light is due to the fact that sometimes scam artists will mislead consumers while falsely claiming to be a legitimate credit repair company. For example, there are scam artists who will fraudulently advertise “credit repair” services to help consumers create a “new” credit identity.
These dishonest companies do not represent the growing number of legitimate credit repair companies who actually follow the law. In fact, most lawful credit repair companies loath the very existence of such lawbreakers. Whether you ultimately choose to hire a credit repair company or prefer to try the do-it-yourself method when addressing your credit problems, it really is unfair to try to lump these scam artists into the same group as compliant credit repair companies. But just to be safe, do your due diligence to make sure the credit repair company is following the rules outlined above.