Is Credit Repair Legal? The Law is on Your Side:
What’s the most common question we get regarding credit repair? If you said “is credit repair legal?”, you’d be right. The media has blasted the credit repair industry because of rampant fraud and abuses. In fact, because of the abuses congress enacted legislation called C.R.O.A. (Credit Repair Organizations Act) that credit repair companies must follow in order to charge for their services. But that doesn’t answer the question as to whether or not credit repair is legal. After all, just because there are dishonest companies guaranteeing to repair credit (which is impossible), doesn’t mean there is not a need for legitimate services. So, is credit repair legal? Here’s the correct answer. YES!
Because of the vast potential for error in the credit reporting system, in 1971 the United States Congress enacted laws to protect the consumer from being victimized by the credit bureaus. It is your right and responsibility to make use of these laws. Fortunately, the law gives you certain rights that allow you to act on your own behalf. See this file from the Federal Trade Commission entitled: “Credit Repair- Self Help May Be Best” from December of 2005.
Credit Repair Law versus Credit Repair Reality
As the credit bureaus and credit reporting agencies computerized their processes and greatly expanded their reach and influence in the late 1960′s and early 1970′s, consumer complaints began to mount at the FTC and at state attorneys general’s offices. The credit reporting agencies quickly became huge bureaucracies and the credit bureaus expressly served only the needs of their clients, the credit granters. Many consumers were negatively affected by the credit bureaus but they had no way to correct or change their credit information.
The American consumer lay completely at the mercy of the credit bureaus so the United States Congress enacted the Fair Credit Reporting Act (FCRA) in 1971 to insure that the credit bureaus investigate the credit items disputed by consumers. This federal law set procedural guidelines which gave the consumer the right to challenge the accuracy, validity, and verifiability of the credit listings appearing in their consumer credit report. It also required that the credit bureau delete any credit listing if it was inaccurate or could not be verified.
In theory, the FCRA charges the credit bureaus with responsibility to the consumer as well as the credit grantor. In reality, the credit bureaus resist, resent, and reject consumer disputes. The credit bureaus would rather be left alone to make a profit. And, each time a consumer challenges his credit, profit is lost.
The credit bureaus first defend their profits by erecting walls of stall tactics, including requests for more information, further clarification, and additional identification. The vast majority of consumers give up before they even receive copies of their credit reports. If a consumer manages to get a credit report, decipher the codified information, write a coherent dispute, and mail it, the bureaus may still find some reason to disregard the challenge. The entire dispute system is designed to frustrate and discourage the consumer.
Many consumers have the idea that the credit bureaus must complete their investigation within thirty days or be forced to remove all disputed information. They threaten to sue the credit bureaus if they don’t conclude their investigation in time. In practice, such thinking is delusional. Nobody forces the credit bureaus to do anything.
However, if you manage to submit a valid dispute letter, and the credit bureau investigates your dispute, the chances of success are good.
If a credit bureau cannot verify an item before completing its investigation, that item will be removed. Many credit granters are simply reluctant to take the time to verify the data. While the credit bureaus are in the business of reporting credit histories, credit granters are not.
There is a system that you can use to ensure that these automated processes work to your advantage. We’ve outlined it in our Credit Scores 101 program.
