With so many people facing credit difficulties today and actively working to repair the damage their credit scores have suffered since the beginning of the recession, the term “legal credit repair” has come up more frequently. So what does this term mean and what is the difference between legal credit repair and illegal repair? Is credit repair legal?
Credit Repair Organizations Act
Realistically the term “legal credit repair” has nothing to do with the actual methods of repairing your credit. Of course there are illegal ways of falsely repairing your credit, such as creating a false identity; these have nothing to do with the term in question. Basically this term used by a legal credit repair company and organizations meant to convey that their services are in compliance with the Credit Repair Organizations Act (CROA). This was an additional title added to the federal Consumer Credit Protection Act in 1996 and concerns the practices of companies involved in the consumer credit repair industry.
The CROA was developed after many credit repair companies resorted to false, misleading, or patently fraudulent measures to the detriment of their clients. These included refusal to disclose what alternative options were available, charging for services before they rendered (or even for services not rendered at all), and hiding exorbitant fees deep within their contracts. The most common technique was simply to promise to provide the client with a perfect credit record – a service that no company can provide – in exchange for a lot of money. The client would pay the money, but of course the company would inevitably fail to give the client the perfect credit rating promised.
The CROA made many of these practices illegal and provided a series of detailed requirements that must be met by all legal credit repair companies. These include false or misleading advertising, full disclosures of the consumer’s legal rights regarding their credit, honest disclosure of what the company can actually do, limited payment to services that have been fully rendered, and also set up a series of penalties for non-compliance.
What legal credit repair service means to the consumer
Generally it means that the company offering credit repair services behaves in full compliance with the CROA. However, since many consumers are much savvier today and an enormous amount of information about the consumer’s individual legal rights is readily available to most people today, this term is not used very often by legitimate companies. While some legitimate companies may still see some benefit in advertising the legal nature of their services, many illegitimate companies – the ones specifically violating the CROA – also have an incentive to claim that their services are legal.
For the individual consumer, assuming you are planning to hire a credit repair company to help you, taking a few minutes to read over the CROA is well worth the time. It specifies precisely what your rights are in respect to credit repair companies and what procedures they must follow to be in compliance. A copy of the law can easily be found online and many consumer advocacy and protection agencies and organizations provide free overviews of the CROA and your rights. If you have decided to hire a credit repair company, knowing your rights and theirs can certainly be helpful information to have.
Of course, you can get free legal credit repair by educating yourself on the ins and outs of credit repair and doing it yourself!
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