Credit repair organizations are viewed with some level of distrust and in some cases, accused of being a scam. Examining the credit repair industry uncovers a sea of contradicting statements.
The Federal Trade Commission, state attorney generals, consumer protection groups and other regulatory agencies generally warn consumers against using credit repair companies. All three credit reporting bureaus adamantly profess that credit repair is ineffective. Conversely, credit repair companies, attorneys and publishers of how-to books who claim to be able to help individuals repair damaged credit spend millions of dollars advertising their credit repair services.
Based on what we examined credit repair companies do perform a valuable service and have a higher likelihood of success than most consumers simply because they are better equipped to handle the service in a diligent manner. Our findings indicate that credit repair in general is effective and credit repair companies cannot perform any unique activities that an individual can perform on their own. Credit repair therefore is a service, not a secret, or special ability except in situations where lawsuits are filed against creditors or credit reporting bureaus for failure to comply with regulations and in the case of re-scoring for mortgage loan approval.
Despite all the warnings against credit repair and claims that it never works, legislation was passed to specifically deal with the business of credit repair and, seemingly, grant the industry legitimacy: Credit Repair Organizations Act (CRO). Unfortunately the vast majority of companies offering credit repair do not meet these guidelines and consumers must still beware.
