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Credit Repair Organizations

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Bad credit can be difficult to deal with. It stymies you from being able to take out a loan, buy a car, or get insurance. There are agencies out there that make promises to clean up your credit for a fee. This may be the action you want to take, but knowing what you can do on your own -- for free, no less -- and what these companies cannot do is going to save you money and headaches.

The Truth about CROs

Credit repair organizations (CROs) have a reputation for not being very legitimate. Unfortunately, this reputation has been rightly earned through years of scams and false advertising. The federal government has some very clear laws concerning your credit score and protecting your rights. To avoid getting taken advantage of, keep the following rights close to your heart:

  • The Credit Repair Organizations Act was signed in 1996. Part of its mission to protect consumers from predatory agencies is requiring that CROs provide everyone seeking their services with a copy of the "Consumer Credit File Rights Under State and Federal Law."

     

  • Each one of the three major credit reporting agencies (Equifax, Experian, and TransUnion) is required to give you a free copy of your credit report, should you request it, once every twelve months.

     

  • By law, you are allowed to dispute anything that shows up on your report, and the reporting agency must investigate your claim (at no cost to you) until the issue is resolved. If something is incorrect, they must remove it from your report.

Bear in mind that any negative information on your report that is actually accurate cannot be removed. Only time can do that. There is no CRO that can have that information scrubbed, because doing so would be illegal. It's also worth mentioning that anything a credit repair agency can do for you, you could do yourself for very little or no cost.

Using a CRO

So, why would anyone use an agency to do what they can already do themselves? It may be an issue of time, stress, or simply that you don't trust yourself to do it properly. If this is the case, there are trustworthy credit repair organizations; just do your research first. In addition, look out for these red flags that should tell you to steer clear of whomever you are talking to:

  • You feel that you are being discouraged from talking to the reporting agencies yourself.

     

  • The agency tries to make you pay them before they have performed the services they promised. This is illegal. That is why it's so important to have a contract that you understand.

     

  • The agency does not tell you, up front, what your rights are and what you can do yourself for free.

     

  • The agency proposes they can make you a "new" credit identity, or that they can get accurate and current information scrubbed from your report.

Staying sharp is paramount when it comes to using a CRO. Unfortunately, this is one of those cases wherein vulnerable people (those with bad credit) are taken advantage of. On the bright side, the government has taken a number of steps to protect you. Just check out the Federal Trade Commission's website for more information about filing claims, your rights, and how to get a free credit report.

Patrick Hanan  Posted by Patrick Hanan on June 15, 2010

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