Home Credit repair Is It Worth Paying Someone to Fix Your Credit?

Is It Worth Paying Someone to Fix Your Credit?

A company says it can fix your credit for a fee. The law sets strict rules on what it may charge, say, and do. Here is what to check before you pay.

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As a business owner, you may get an offer in your inbox or your mailbox. Pay a company, it says, and it will fix your credit. Before you hand over money, know what federal law says. It explains what a credit repair company may and may not do. That knowledge is the best assistance with credit repair you can get, and it costs nothing.

What the law requires before a credit repair company can charge you

The Credit Repair Organizations Act spells out the rules. The FTC says the law requires credit repair contracts to be in writing. A company may not provide any service until you have signed and dated that contract.

The contract must state the terms and conditions of payment. It must include the total amount of all payments. It must list every service the company will do for you. It must also list every promise of results. It must include the firm's name and principal business address.

The firm has to hand you a written disclosure statement before any contract is signed. The law says that statement must be a separate document, not part of the contract. It tells you that you may challenge mistakes on your own. You can do this by contacting the credit bureau directly. It also says the bureau cannot charge you a fee to look into the dispute again. It also says you may sue a company that violates the law.

What the Credit Repair Organizations Act forbids

The biggest rule is about money. The CFPB says the law bans credit repair companies from taking money first. They cannot take money before they finish the promised work. Every kind of advance payment, before the work is finished, is against the law.

The law also bars untrue or misleading claims about a firm's services. It also forbids changing your ID to hide true bad marks in your credit record.

One more thing. The law says any waiver of these protections is void, and no court may enforce it. A contract that breaks these rules is also unenforceable. A company that breaks the law may owe you money for your losses. It can also be on the hook for punitive damages and the cost of your attorney.

Your right to cancel within three business days

Each contract must carry a conspicuous bold statement near the space where you sign. The note must say you have the right to cancel. Each contract must come with a duplicate form headed Notice of Cancellation. According to the CFPB, you may back out of a fresh contract for any reason within three business days, at no cost.

Warning signs of a credit repair scam

The CFPB names the red flags. A company that asks you to pay before providing services is breaking the law. Treat that as a warning sign. A fraudulent outfit may also promise a set jump in your credit score.

Watch out for promises to erase true, current bad marks too. The CFPB says no one can remove accurate and current negative information from your credit report. The Credit Repair Organizations Act forbids untrue or misleading claims. These claims cannot be used to offer or sell credit repair services. Our page on credit repair scams covers the patterns in more depth.

What you can do yourself for free

Here is the part most offers leave out. The CFPB says the Fair Credit Reporting Act lets you challenge mistakes in your own credit reports at no cost. You contact the credit bureau directly about the error. The law's required disclosure says this. The CFPB offers online guides and tools on how to do it.

One limit is worth knowing. The Fair Credit Reporting Act says its direct dispute duties do not apply to disputes submitted by or prepared by a credit repair organization.

If you want a walkthrough, see how do I repair my own credit. For the business side, see our guide to business credit repair.

How to check out a credit counseling agency

Credit counseling agencies are a different kind of help. Screen it first. A trustworthy credit counseling agency should send free information about its services. It should not ask for details about your situation first. It should not ask about your money problems first. The CFPB says a service that will not send free information is a red flag, and you should go elsewhere for help.

Check the agency out with your State Attorney General's office. Check with your local consumer protection agency as well. The CFPB says all forms of upfront payment before credit repair services are completed are illegal.

For a broader look at the whole subject, start with our page on how to repair credit. The free route is open to you either way.

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