The Credit Repair Organizations Act (CROA) is a section of the Consumer Credit Protection Act. This law was added to the United States Code in 1996 after the government received a large number of complaints about fraudulent credit repair organizations.
Credit Repair Basics
There is no quick way to improve your credit history although some companies claim that they can boost your FICO score overnight. The CROA specifically outlines what credit repair companies can and cannot do when marketing and providing services. These are a few things that you should know if you are interested in working with a company that offers credit repair services.
CROA Legal Requirements
- The act prohibits companies from accepting payments until services are performed.
- Organizations are banned from misrepresenting their services and making false claims, such as promising to remove negative information that is accurate or boosting your credit score by a certain amount.
- Credit repair companies must provide customers with a written contract that outlines what services will be performed.
- Customers have three days in which they can cancel signed contracts, and they must be notified of this right.
- Companies must explain your rights under the Fair Credit Reporting Act, and they cannot force you to sign away these protections.
- It is illegal for companies to deceive creditors, create a new identity for customers or suggest that you provide false information.
Your Rights Under The Credit Repair Organizations Act
Financial experts and government agencies like the Consumer Financial Protection Bureau offer a number of tips for avoiding credit repair scams. Here are a few ways that you can protect yourself.
- Never provide upfront payments. Be aware that some legitimate companies charge monthly service fees instead.
- The organization must tell you what you can do without assistance. For example, if there is incorrect information on your credit report or a collection that cannot be verified, you can dispute it, and it won’t cost anything.
- Some credit repair companies charge $100 per month or even $1,000 per account. Consider whether you would be better off putting this money toward your balances rather than paying for credit repair services.
- If you decide that you need help improving your credit, look for a reputable company that follows the law and knows how to negotiate with creditors. Legitimate organizations have been in business for a long time and offer a money-back guarantee.
Taking the Next Step
Consider debt consolidation and other alternatives. Paying down your debt and keeping your credit use below 30 percent will show that you are a responsible borrower. Know your rights. Review your credit report, and dispute inaccuracies before you pay for these services. Be suspicious when a company seems too good to be true.