Have you been approached by companies offering to clean up your
credit rating and give you a fresh start? If you are thinking of working
with one of these "credit consultants" or "credit rebuilding companies,"
proceed with extreme caution. There have been many abuses, and thousands
of people have lost money they could not afford -- and ended up with
nothing to show for it. In fact, because of abuses by these companies,
Congress recently passed a federal law to try to crack down on them.
Following is a summary of that law.
These are the main protections offered by the new federal credit repair law. All became effective April 1, 1997:
1. It is illegal for a credit repair company to make any statement that is untrue or misleading, or advise anyone to make a statement that is untrue or misleading, to a credit reporting agency or a credit grantor. (They can't tell you to lie about accurate, but negative information!)
2. It is also illegal to advise a consumer to alter their identification or alter the identification of their credit report in order to remove or hide negative, accurate information in their credit report.
3. Credit repair organizations cannot accept payment for services until they have been performed. Don't pay until you've seen results!
4. Before you sign a contract with a credit repair organization, it must give you a statement that explains your credit reporting rights under state and federal laws. The company must get your signature on that document and keep it on file for two years.
5. You must be given a dated, written contract to sign, which explains the services that will be performed, any guarantees about services, how much it will cost you, and the date by which the services will be performed.
6. You have the right to cancel the contract, without penalty, within three business days of when you sign it. Your contract must explain how to cancel.
Keep in mind that additional state laws may also require credit repair firms to be licensed or bonded. If you are still considering doing business with one, check with your state attorney general or consumer affairs office for more information.
