Your credit score has never been more important for saving money, accessing the keys to building wealth, and financial security, yet we often have bumps in the road to a great credit score. Late payments, bankruptcies or foreclosures, or even identity theft will all derail a credit score quickly, and rebuilding it can take a whole lot of time, money, and paperwork. For that reason, credit repair companies play a vital role in rescuing a consumer’s credit vitality.

However, these days, it’s hard to know who to trust. Just start Googling “credit repair” and you’ll see a wide array of results and opinions, from glowing testimonials all the way to calls that credit repair is an outright scam.

So, how can you tell if a credit repair company is legitimate? Here are some guidelines to help get you started when choosing the best possible credit restoration firm:

Do they charge up-front fees?

Whenever we’re investigating if a business is legitimate, it’s best to follow the money trail, as well as see if they’re doing everything by the book. Well, you can judge a credit repair company on both by looking at how they charge.

In fact, according to the Credit Repair Organizations Act (CROA), no credit restoration fee can charge fees up-front before services have been provided. This Federal statute regulates the way firms can get paid in the financial industry, including credit repair. The CROA mandates that it’s illegal for any company can take a consumer’s money before certain services have been completed, called advanced billing.

Therefore, if a credit repair company solicits you and asks you to pay a big chunk of change up-front just to get started, be cautious. While they may structure their fee schedule into stages, based on the work performed to get a client file initiated, for instance, collecting up-front fees for work not yet performed is against the law – and a clear sign that they are illegitimate!

How do legit credit repair firms charge?

Now that you know what to look for if a company is collecting fees and operating illegally, it’s also good to know how a legitimate firm can collect their well-deserved income.

Generally, there are two ways your contract can be structured: with a subscription-based plan that charges a certain amount per month for their services (after they’ve been provided), or a pay-for-performance fee structure where you are billed once certain milestones have been satisfied, like certain items disputed, removed or corrected, etc.

Here are some other things to look for if you’re trying to gauge if a credit repair company is legit:

The laws on how credit repair companies can do business legitimately are crystal clear. For instance, any credit restoration firm must disclose to consumers which services can be performed on your own.

Additionally, credit repair firms must give you a copy of their agreement or contract before they ask you to sign on the dotted line, giving you a chance to review and ask questions, etc.

Every contract must contain the following:

• The total dollar amount of the charges you’re agreeing to.
• A clear description of the services they are providing and performing.
• A timeline with date(s) when those services will be performed.
• The legal name and address of the entity actually doing the credit repair services (since so many firms are just third-party marketing companies).
• They must also disclose in writing that you can cancel the contract you sign with them for up to three days.

Other credit repair firm requirements:

But, before you sign anything or money changes hands, they must also provide you with a copy of the guide, Consumer Credit File Rights Under State and Federal Law. This guide covers all of your rights as a consumer when it comes to getting a copy of your own credit report and the process of disputing incorrect information.

After reading this, you’ll also know what warning signs to look for that a credit repair company is blatantly operating illegally.

  • For instance, if they make lofty promises and assurances in their advertising, you can be sure they are suspect at best. Signs, ads, and social media posts that proclaim slogans like “No Credit = Never a Problem” “Automatically qualify!” “Improve credit your score by 100 points guaranteed!” and the like are all illegal, as they don’t follow the advertising regulations outlined by the CROA and others.
  • They also cannot attempt to remove items from your credit report that are legitimate and factual by claiming you were a victim of identity theft, financial fraud, etc.
  • If a credit repair company offers to add or make up new tradelines (that don’t exist in real life) in exchange for money, they are operating illegally.
  • Likewise, if they tell you that they can create a new credit identity for you with a new name, social security number, date of birth, etc., they are not acting lawfully.

Insider tip: ask how many files are on the desk of each associate.

If you really want to cut through the rhetoric and promises and see if a credit firm will do a good job for you, ask them how many files each associate handles at once. Some big, impersonal companies put so many files on each employee’s desk – up to 1,000! – that there’s no way they can do a good job and give each a personal touch. But some firms are very good at signing up new clients and accepting their money but not so good at actually handling credit repair – even if they are legal.

As a general rule, look for a credit repair that has a low ratio of client files per desk (or associate). Blue Water Credit, for example, not only maintains the highest professional standards but makes sure each well-trained associate has only 120 files under their management at any given time, ensuring they can do an exemplary job with communication and personal care.

Have you been “taken” by a bad credit repair firm?

Did you fork over money up-front, only to see little or no results? Are they making huge promises and pressuring you to sign immediately?

Consumers that have encountered with illegitimate credit restoration companies do have some recourse. The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) are tasked with protecting consumers and enforcing the credit regulation laws, so call their hotline number, go to their websites, and file a formal complaint if you’ve been treated unfairly or the victim of credit repair fraud!

How to find a legitimate credit repair firm:

If a company is legitimate, they will have no problem disclosing everything in writing and taking their time to educate you about their services, including a range of realistic outcomes that other clients have seen. However, many shady firms try to skirt these rules by telling you one story verbally, but then the contract will look entirely different. Therefore, make sure you take notes as they talk, ask questions, and don’t be afraid to request clarity and everything be put in writing.

If you want the best credit repair firm that operates legally, ethically, and achieves excellent results, contact Blue Water Credit for a complimentary consultation – you won’t be disappointed!