What is illegal credit repair?

Illegal: Modify your social security to improve your credit rating. Tell law enforcement about any credit repair company that encourages you to change your social security number or purchase a new security number in your name. Illegal: Challenge all of the credit lists in your credit report. To be clear, repairing credit as a whole is not illegal.

Credit repair, at least of a legal nature, is simply the process of removing inaccurate or unverifiable information from a consumer's credit report. This is done by disputing negative items with credit reporting agencies (CRA, AKA credit bureaus). Alternatively, the information in the credit report may be challenged through the financial institution that provides the data to the CCA. Either way, when the investigation is completed, the credit bureau must give you the results in writing and provide you with a free copy of your credit report if the dispute resulted in a correction.

The main objective of CROA is to define which companies or organizations have the legal right to provide credit repair services. For this reason, it's extremely important to do your due diligence before deciding to work with a credit repair company. It only takes a few negative moves to damage your credit rating, making it difficult to approve credit cards, car loans, and other credit-related services. Credit repair may not have the best reputation when it comes to financial services, but it is a federal protection right.

If the credit transfer is successful, CRAs must remove all negative information involved within four business days and prevent it from reappearing on your report, which will “eliminate all negative elements from your credit report.” The CFPB also notes that you have the right to cancel your contract with any credit repair organization for any reason within three business days at no charge to you. If you find negative, but correct, information like that in your credit reports, the best thing to do is to practice good credit habits in the future. There is also a federal law that describes how credit repair companies can provide services to consumers. The Fair Credit Reporting Act (FCRA) gives you the right to dispute information in your credit reports that you believe is incorrect.

Other states establish specific systems to determine when rates can be assessed and prohibit acts that credit repair companies cannot perform without breaking the law. The FCRA requires that negative information be removed from a credit report after seven years (with the exception of a Chapter 7 bankruptcy, which can remain on your credit report for up to 10 years). They can provide information about your state's credit repair laws and help you understand legal jargon, so you don't have to read the law yourself to know what rights you have. The way to do this is by requesting copies of your credit reports from the three major national credit bureaus, Equifax, Experian and TransUnion.

Typically, the credit repair process involves sending letters on behalf of consumers to challenge the validity of the data in question and asking the CRAs to validate the items.

Ada Porrini
Ada Porrini

Friendly beer advocate. Incurable coffee geek. General pop culture scholar. Incurable music lover. Wannabe beer nerd.

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