Legal Credit Repair Vs Illegal Credit Repair And Credit Restoration Mistakes

The term "legal credit repair" implies that illegal credit repair has been a problem in the marketplace for credit restoration...and that insinuation is correct. Credit repair scams may not as blatant as they used to be, but many consumers still get seduced by the promise to "instantly" improve credit score profiles or to "improve credit reports" overnight.

Legal Credit Repair

Credit Repair organizations are governed by the Credit Repair Organizations Act of 1996 (CROA). This law was enacted to limit the advertising claims and fraudulent practices of unethical operators who did things like collect money for services they had not intention of rendering, or making claims of guarantees, and even engaging in illegal practices in the course of what they sold as "credit repair".

CROA instituted some of the following requirements on these companies:

They cannot make false statements or misrepresent their services.
They cannot advise you to create a new identity - false social security numbers, or employer identification number (EIN) to get new credit.
They must provide you with a written contract explaining the services to be provided and the cost of the services.
They must provide you with 3 copies of written notice of your right to cancel the contract for services within 3 days.
They have to provide you with written notice that, by yourself, you can dispute items that are inaccurate, unverifiable, or beyond the legal reporting period.

These requirements above are part of the CROA and were specifically intended to help consumers from being susceptible to credit scams. Any credit repair organization or company that violates any of the above may be involved in illegal activity, and you should steer clear of them.

Is Credit Repair illegal?

It should be obvious by now that the answer is a resounding "No". However, the scale of the need for credit restoration services in the consumer marketplace has drawn the attention of all kinds of financial criminals and "fly by night" operators who only need to buy a few business cards, a road sign, or a newspaper classified ad to claim they are in the "credit repair" business.

In addition to requirements listed above, consumers should also pay attention to the age old rule of thumb regarding things like this:

If it sounds too good to be true, it probably is.

If you are a consumer in need of a credit repair program, you should be wary of any business making guarantees of restoring your credit, or promises to "remove all negative items", or even "instantly fix your credit". To the best of my knowledge, there is no legal way to "instantly" repair your credit.

Instead, an ethical, knowledgeable, and legal credit improvement specialist will generally research your personal myFICO scores and the factors affecting you individually, identify any information that doesn't meet the standard of "accurate, complete, timely, and compliant", and provide you with a plan, process and tools for getting the credit agencies to act on your behalf.

Credit Repair Scams - What To Do If You Made The Mistake And Fell For These

Learning how to recognize risky credit improvement schemes and outright credit scams is one of the most important things you can do as a consumer to protect yourself. In addition to ensuring that operators you deal with are compliant with the list of requirements above, stay away from operators who imply that they are endorsed by the FTC, or who offer "guarantees" of credit repair, or who suggest "disputing everything negative" on your credit report.

Remember also that credit repair organizations are barred by law from demanding prepayment for credit restoration services. While there are some variations (in Florida, your payment can be put into an escrow account to be drawn after the work is done) in how this is done, the work must always be done before a company is paid.