Good credit is an excellent goal. Credit scores and history play a big role in our financial lives. Being approved for a loan, getting a low interest rate, paying less for your vehicle insurance premium, or possibly even securing employment can be impacted by our credit history.
People with poor credit scores may consider credit repair to erase credit problems. This isn’t always the case. Rebuilding your credit takes time. You can do it yourself, or you can hire a credit repair company to help.
What Is Credit Repair?
Credit repair is when a credit repair company or organization makes attempts to remove information from your credit report in exchange for payment. Credit repair companies are for-profit. They often market themselves with promises to people to improve their credit. They are legal organizations and are available in every state except Georgia.
Credit repair companies are supposed to be transparent in promoting their services to remove inaccurate information or unverifiable information from consumer credit reports. If you communicate with a credit repair agency who promises to have accurate, negative information removed before it falls off, run the other way.
The Credit Repair Organizations Act (CROA)
The Credit Repair Organizations Act (CROA) is federal. The CROA defines how credit repair companies are allowed to operate. There are specific guidelines credit repair agencies must follow, and if they are not compliant, they break federal law.
Under CROA, credit repair companies are not allowed to:
- Advise credit repair customers to falsify statements to credit reporting agencies.
- Advising credit repair customers to alter their identification to prevent credit bureaus from matching them with their credit information.
- Charging customers fees for services not rendered.
- Promising they can remove information from their customer’s credit reports.
Credit repair organizations must also notify their customers of the following:
- Anyone can dispute their own credit report information, free of charge.
- If the credit repair company violates CROA rules, consumers can sue.
- Mistakes can occur when reporting to credit bureaus.
This information must be present in contracts between credit reporting agencies and the customer. These disclosures, among others, must be provided to customers in a separate form. Credit repair agencies are not allowed to force or persuade consumers to sign any waivers that would give up those rights. Any attempt at doing so would be a direct violation of the CROA.
What Do Credit Repair Companies Do?
Credit repair companies take tedious tasks off of your hands. They analyze your credit reports and work with the debt collectors or lenders to have inaccurate information corrected or removed on your behalf.
Credit repair companies have expert knowledge of what is allowed on a credit report, how to investigate accurate information and how to communicate with credit bureaus and creditors to have inaccurate information removed.
How Much Does Credit Repair Cost?
Credit repair organizations have two ways to charge. They may offer a subscription service where you pay a monthly fee as long as the credit repair company is working on your credit report.
The second method is by charging you a flat fee per item deleted thanks to their efforts. This is typically viewed as the best method because it’s a win/win for the consumer and the credit repair company. It keeps them compliant with the CROA and allows consumers to pay for only tangible results.
Does Credit Repair Really Work?
It’s true there is nothing a credit repair company does that one can’t do for themselves for free. Negative information does fall off of credit reports within 7 to 10 years so it will eventually fall off with or without help.
However, if you are serious about cleaning up your credit report and making better financial decisions for your future, credit repair can be a great way to remove inaccurate information and show future lenders that you are serious about paying your debts and maintaining a positive credit score.
