Home Credit repair What Credit Repair Can and Cannot Do for You

What Credit Repair Can and Cannot Do for You

Ads promise a fix for your credit. The law says what a company may charge, what it must put in writing, and what you can do yourself for free.

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Business owners see credit repair ads like anyone else. A company says it can fix your credit for a fee. Before you sign anything, it pays to know what the law allows. Credit repair is a regulated service, and you hold rights the company cannot make you waive.

What credit repair means

A credit repair company says it will fix your credit report or score. It charges a fee for this. One law, the Credit Repair Organizations Act, or CROA, sets the rules for them. Congress wrote the law to give buyers the facts they need to make an informed choice. It also aims to protect the public from unfair or deceptive practices.

The law forbids untrue or misleading claims about what a service can do. So a company cannot promise what it cannot do. That limit matters, because some things no one can do.

What the law requires of a credit repair company

CROA sets hard rules. The company may not take any payment before it finishes the promised services. The CFPB says all forms of upfront payment before services are completed are illegal. A setup fee charged before any work is done breaks the law.

The company also may not start work without a written and dated contract that you sign. The contract must state the terms of payment, including the total of all payments. It must describe every service to be performed, with all guarantees of performance. It must give the company's name and principal business address.

Before you sign, the company must give you a written disclosure statement. It must be a separate document, not tucked into the contract. It says you can dispute wrong information yourself. You just contact the credit bureau. It says the bureau cannot charge you to look again at a disputed item. It also says you can sue a company that breaks the law.

The three-business-day cancellation right

Every contract must have bold words near the signature line. They must say you can cancel. Each one must come with a duplicate form headed Notice of Cancellation. The CFPB says you can cancel a new contract for any reason within three business days, at no charge.

If a company tries to get you to give up these rights, that is itself a violation. Any waiver you sign is void, and no court will enforce it. A contract that does not follow the law is void too.

Red flags the CFPB warns about

The CFPB lists warning signs of a credit repair scam. One is a company that asks you to pay before providing services. So is one that guarantees a specific increase in your credit score.

If you already signed up, check your contract against the rules above. A company that breaks the law can owe you money. It can also owe extra damages and lawyer fees. The law says compliance is enforced under the Federal Trade Commission Act.

How to check out a credit counselor

People often mix up credit repair companies and credit counselors. They are not the same. The CFPB says a good agency sends free facts about its services first. It does not ask about your money troubles up front. Ask your State Attorney General's office about the agency. Ask your local consumer protection office too. A service that will not send free information is a red flag. Go elsewhere.

The free alternative: dispute errors yourself

Here is the part many ads skip. The CFPB says you can dispute errors in your credit reports yourself, for free, under the Fair Credit Reporting Act. No company has to do this for you.

To fix an error, you usually write to two places. Start with the credit bureau. That may be Experian, Equifax, or TransUnion. Explain in writing what you think is wrong and why, and include copies of documents that back you up. Send it by certified mail and pay for a return receipt so you have a record. The bureaus also accept disputes online or by phone.

Then contact the company that supplied the information, in writing. The bureau must investigate your dispute and report the results back to you. If the company finds the information it reported is inaccurate, it must notify all three nationwide credit bureaus.

Our guide on how to dispute credit report errors walks through each step. For the wider picture, see how do I repair my own credit without paying a company.

What a dispute can and cannot fix

A dispute is for mistakes. The CFPB says no one can take true, current bad marks off your report. Anyone who says otherwise is not being straight with you.

Say the bureau looks again and still sides against you. You can add a short note about the dispute to your file. It goes in your file and in future reports. Say a business keeps reporting the item. The bureau must then note in your file that you dispute it.

Where to go next

Your own credit is one part of the picture. Your business can have a credit file of its own. Read about business credit repair. For the D&B side, see our guide to getting a DUNS number free.

Stuck with a report problem? You can file a complaint with the CFPB about a credit report.

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