While the credit repair process is legal ( see credit repair organization act or CROA ) and can be very effective, there are scam artists. We’re going to show how to avoid them.
What are some warning signs of credit repair scams?
- If they guarantee you results
- If they take money upfront
- If they suggest file segregation
- If they won’t give you copies of the letters they send on your behalf
- They don’t inform you that you can repair your credit free
- If they tell you not to contact the credit bureaus.
Let me elaborate a little bit on some of these issues because they can be confusing.
Credit repair guarantees: A credit repair company cannot guarantee results, e.g., to remove negative items or improve your score. However, they can offer a customer service guarantee if they choose to. My Credit Group offers a satisfaction guarantee
Taking money upfront: credit repair is done on a month-to-month basis, so if a credit repair company charges you after they do “this month’s work,” that is legal. If you call one, and one of the first things they do is ask for a sign-up fee or pay for the entire program in one lump payment, those are both illegal.
Fixing your own credit: Technically, you don’t need a credit repair agency to do this. However, a good company will save you some time and headaches, and they will likely know the ins and outs of the system better than the average consumer.
Are credit repair companies legal?
The short answer is yes; if they follow the rules above and abide by state and federal laws, credit repair companies are legal, and some offer a great benefit to consumers who don’t want to do it on their own.
Is paying someone to fix your credit worth it?
This subject isn’t as black and white as how to avoid credit repair scams. In my opinion, you can find a legitimate credit repair service and get inferior results. Again, IMO most companies leave out some very vital steps in their process to make the process easier on them. So here is my opinion on that subject:
*Edit We’ve written more in-depth article here Is paying someone to fix your credit worth it?