If you’re struggling with a less-than-perfect credit score, credit repair services might seem like an attractive option. However, before choosing just any company that claims it can fix your credit, it’s essential to know whether they’re operating legally. What many people don’t realize is that credit repair is legal — but only when it follows the rules set by the Credit Repair Organizations Act (CROA).
The CROA is a federal law that outlines exactly what credit repair companies are allowed — and not allowed — to do. Here are some key requirements and protections you should know:
1. You Must Receive a Clear, Detailed Contract
Before any services are performed, the credit repair company must provide you with a written contract. This contract should clearly describe:
- The specific services they will perform
- The total cost of these services
- The estimated time frame for completion
Never agree to any work without first reviewing and signing a proper contract.
2. No Upfront Payments Are Allowed
Credit repair companies are prohibited from demanding payment before they provide any services. If a company asks for money upfront, that’s a major red flag — and likely a scam. Always pay only after services are delivered.
3. No False Identity or Illegal Credit Changes
A legitimate company will never suggest changing or falsifying your identity to improve your credit. All efforts to repair your credit must be made legally, without misrepresenting your personal information or history.
4. Honest Representation of Services
The services a credit repair company offers must match exactly what they describe to you. They cannot promise one thing and deliver something else, nor can they guarantee results that are misleading or unrealistic.
5. No Misrepresentation of Your Credit History
Attempting to lie about, erase, or alter your true credit history in illegal ways is against the law. Any company that engages in these practices is breaking federal regulations.
Before working with any credit repair organization, take the time to learn about your rights under the Credit Repair Organizations Act. Understanding what companies can and cannot do helps protect you from scams and dishonest practices.
If you come across a company operating outside these legal guidelines, it’s important to report them to your state attorney general’s office immediately.
