Is Credit Repair Legal?

Many credit repair businesses offer credit repair through unethical tactics. But actual credit repair is NOT illegal. In fact, it is a much-needed service to most people, but there are certain rules that they need to follow. The Credit Repair Organizations Act, or CROA, is a federal law that protects consumers from unfair and deceptive practices by credit repair organizations.

There are various ways to detect an illegal credit repair business. Here are a few:

  • Charging in advance for credit repair services – Under CROA, credit repair organizations may not require payment until they have rendered services. They may only collect payment after the promised services have been performed.
  • Failing to provide a written contract – Credit repair organizations are required to provide a written contract before services can be rendered. The contract must contain specific terms, such as the terms of conditions of payment, a description of the services to be performed, and a statement indicating the consumer’s right to cancel without penalty within three business days.
  • Suggesting creating a new or altered identity so you can start new with your credit – It is illegal to create a new credit profile (for example, by obtaining a new social security number or other identifiers) to hide past negative history.
  • Making guarantees about things outside of its control – Credit repair businesses may not make any untrue or misleading representations about their services. When a company makes a promise or guarantee about something out of its control, it has made a misleading representation. For example, a credit repair business cannot properly guarantee that any removals of negative items will occur; removals are under the control of the credit bureaus, not credit repair organizations.

An organization that violates the CROA is unethical and should not be trusted with your credit repair needs. If you want to learn more, check out our blog.

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