Service
Legitimate credit repair companies provide a service that you could actually do on your own, says Roger Dudenhoeffer, senior vice president of Jefferson Bank in Missouri. They obtain copies of your credit reports from TransUnion, Experian and Equifax and review negative items carefully to see if there are any errors. Then they file a dispute for every error they find. If the credit reporting bureaus cannot verify the disputed information, it has to be taken off your credit report. You are entitled to get a free copy of your credit reports every year, and you can file your own disputes at no cost. However, credit repair companies are experienced at finding obscure errors that can be challenged. According to the Credit Infocenter, these errors may include incorrect account numbers, wrong dates of last activity, erroneous account status or even a wrong balance or credit limit. A good credit repair company will find as many legitimate ways to dispute negative items as possible.
Information
The Federal Trade Commission says you should get identifying information from a credit repair company before agreeing to do business. This information should include the the company's name and address, details of what it is agreeing to do for you and how long the process will take. The company should also put the total cost of its service in writing and spell out the payment terms. Do not rely on verbal promises. Make sure all guarantees are written out in detail and signed by the company.
Legal Limitations
The FTC says that credit repair companies must follow the Credit Repair Organizations Act. They cannot make false promises about what they will do for you, and they are not allowed to charge you until they have performed their service. They must have you sign a contract before doing anything on your behalf, and you have three days to cancel the contract with no penalty.
Warning
Some credit repair companies will try to use unethical and illegal tactics to repair your credit, reports Colleen Hogan of KRCG News in Missouri,. These tactics include disputing legitimate items on your credit reports or building a new credit file for you with a new tax identification number. Claiming that legitimate negative items are incorrect will temporarily boost your credit score because the bureaus will remove the items while they do an investigation. However, Hogan says, the items will go right back on your report once they are validated. She warns that building a new credit file under a tax identification number rather than your Social Security number is a felony.
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