Credit Repair Companies
I felt it was extremely important to write about this because of the many people who may have seen their good credit fall to the wayside as a result of a recent job loss, cut back, family emergency or many other unforeseen circumstances who are desperately seeking for help with their personal credit. 
All across the country I have heard stories like Joanna Fridinger, owner of a limo company in Baltimore, who had the credit limit on her American Express card cut to $1,400 from $19,500 after getting just a single late fee on another credit card.
You’ve probably seen headlines like…
‘U.S. Consumer Credit Card Debt May Crash Economy’ ~ Fox News
‘Credit card hike fright: Banks raising rates, even if you’ve paid on time’ ~ Daily News
‘Some Credit Card Companies Profiling Customers’ ~ ABC News
‘Consumers’ Credit Card Limits Slashed as Companies Try to Reduce Risk’ ~ the Washington Post
With all this circulating the media it’s easy for some people to be influenced to believe that there is no hope and no way to get their credit back on track.
Not true!
When it comes to personal credit challenges there are several alternative solutions that each and every individual should consider.
In this particular post I am going to cover one of the many viable solutions for individuals undergoing personal credit challenges.
First, let me say that this is my personal opinion and after working with thousands of consumers on personal credit issues over 21 years one of the most commonly asked questions I hear is ‘ How can I get my personal credit restored?’
Before I get into this highly misunderstood service called ‘credit restoration’ or ‘credit repair‘ let me be the first to tell you that if you are an entrepreneur or small business owner that has experienced personal credit issues don’t be alarmed when it comes to obtaining business financing.
One of the major benefits for entrepreneurs and small business owners is the ability to build a business credit profile separate from your personal credit profile.
This post is intended to fully educate you on answering two main questions:
Is Personal Credit Repair Legal?
Are Credit Repair Companies Legal?
Let’s get started shall we?
Personal Credit Repair
The Federal Trade Commission which is a federal agency created to investigate and eliminate unfair and deceptive trade practices in business, initiated a specific body of legislation which was put in place to regulate the credit reporting agencies and protect YOU the consumer from unfair credit reporting. This legislation is called the Fair Credit Reporting Act.
Take a look at the FCRA
Now look at section 611 of the FCRA which outlines the procedures in case of disputed accuracy on your credit reports. The FCRA empowers YOU the consumer the right to dispute and verify the accuracy of questionable items on your personal credit reports.
So, this means you can in fact repair your own credit in accordance with the Fair Credit Reporting Act.
But here’ the catch!
The underlying problem for the consumer is that this is a self policing law. It’s completely up to you the consumer to police your own personal credit reports. It’s up to you to find any errors and it’s up to you to monitor any and all activity on your personal credit files with all three main credit reporting agencies.
In the justice system you are innocent until proven guilty but in the credit reporting system you are guilty until you proof yourself innocent.
If you haven’t seen your personal credit reports recently keep in mind that you are entitled to one free credit report per year which can be accessed at http://www.annualcreditreport.com
Now don’t worry this won’t count as an inquiry when you order your free annual reports.
Credit Repair Companies
Despite the massive efforts of the credit reporting agencies (which are privately held companies) to convince you otherwise, there are many credit restoration companies that are no different than most other services. Like all industries, less-than-honest companies do exist and are damaging to their clients and to the credit repair industry as a whole.
For example, you may have 20 car mechanics in your hometown. Most likely, 17-18 of these mechanics are honest, hardworking people who want to earn a living and give you the best service possible. The other 2 or 3 mechanics may not be so honest and will take your money while not giving you the quality or quantity of service you pay for… or, they may be out-and-out crooks who take your money and lie to you.
This doesn’t mean that your town is a bad place to get your car fixed; it just means that, like any industry anywhere, there are good companies, mediocre companies, and really bad companies.
Let me take you back a little bit first because the credit restoration industry was completely unregulated in the mid to late 1970s, hundreds of credit repair companies sprung up all over the place. Most of them were dishonest and were interested only in stealing money from gullible consumers. As a consequence, thousands of consumers were milked out of millions of dollars while receiving little, if any, of what was promised to them.
As a result the FTC initiated another legislation called the Credit Repair Organizations Act (CROA) that outlines how these companies may legally operate.
Take a look at CROA
This Federal regulation is proof that the industry as a whole is legal and not a scam. I think the reason why there has been this general negativity about credit restoration companies is because of the few bad companies that have given the industry as a whole a bad name.
The Federal Trade Commission regulates credit bureaus and credit repair organizations.
Take a look at the definition of a Credit Repair Organization (look at Sec. 403 Definitions)
(3) Credit repair organization. — The term ‘credit repair organization’–
(A) means any person who uses any instrumentality of interstate commerce or the mails to sell, provide, or perform any service, in return for the payment of money or other valuable consideration, for the express or implied purpose of
(i) improving any consumer’s credit record, credit history, or credit rating; or
(ii) providing advice or assistance to any consumer with regard to any activity or service described in clause (i); and
Now let’s look at Section 404 Prohibited Practices.
Specifically look at definition (b) payment in advance.
(b) Payment in Advance–No credit repair organization may charge or receive any money or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform for any consumer before such service is fully performed.
Basically, a credit restoration company cannot charge you for credit restoration upfront unless they are exempt from CROA.
The specific organizations and institutions that DO NOT fall under the definition of a credit restoration organization and are therefore exempt from prohibited practices are non profit companies, credit unions and affiliates of credit unions.
This means that there are a very select few credit restoration companies out there that can charge for credit restoration upfront.
Take a look at Sec 403 definitions under description (B) does not include-
These organizations and institutions include any nonprofit organization which is exempt from taxation under section 501(c) of the internal revenue code and any depository institution (as that term is defined in section 3 of the Federal Deposit Insurance Act) or any Federal or State credit union (as those terms are defined in section 101 of the Federal Credit Union Act), or any affiliate or subsidiary of such a depository institution or credit union.
So if you decide to enroll in a credit restoration service review the company’s track record and BBB rating and make sure they are either a non profit or credit union (affiliate).
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About the Author
Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for AllBusiness, Dun and Bradstreet Credibility Corp, the SBA Community, and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.
I was excited to write this particular post because there is such a tremendous lack of awareness in the entrepreneur and small business community surrounding the business credit industry.
Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in ‘Fox Small Business’,’American Express Small Business’, ‘Business Week’, ‘The Washington Post’, ‘The New York Times’, ‘The San Francisco Tribune’,‘Alltop’, and ‘Entrepreneur Connect’.
Most individuals who have made it a habit to annually check their credit reports with the three credit reporting agencies; 
Your payment history accounts for 35% of your credit score according to Fair Isaac. The most common advice you will hear from every so called “credit expert” is make your payments on time. While this is the basics of building and maintaining a good credit score let’s go way beyond that.