Get Familiar With These Laws — They Can Help You Fix Your Credit

Updated: December 23, 2020

When it comes to fixing your bad credit, you don’t have to go it alone, credit laws exist to work for you.

Many people are aware of the organizations, such as credit repair companies, that can help you implement strategies. Their approach to credit repair can help you delete negative items from your credit history, get better interest rates and obtain new credit

But, this is what many people aren’t as familiar with: In addition to credit repair services, there are credit laws in place designed to help you improve your financial health. In return, you may qualify for a credit card thanks to an improved credit score, or be eligible for a mortgage, or any number of things that having a good credit score offers.

Here are some ways to leverage regulatory power to help you fix your credit. It is so important to get familiar and to take advantage of these credit laws.

The Fair Credit Reporting Act

The federal Fair Credit Reporting Act (FCRA) established a legal framework that creditors and the reporting agencies must follow to protect your credit information and history. It limits who can request your credit report from credit reporting agencies like Transunion, Experian and Equifax. It also minimizes the credit details on reports from these bureaus. The law also establishes a consumer’s right to accuracy in credit information and provides for a fraud alert process. Others who can view your credit report can only see employment, court cases, loan and credit applications, bank closures and insurance.

One of the biggest ways this law helps with credit repair is that it gives you the right to question negative information on your credit report. You can also request the removal of inaccuracies. Credit bureaus have 30 days to verify whether the information is correct. If they can’t do so, then they must remove the inaccurate information from your file.

This is one of the credit laws that provides a universal right to a free credit report once a year from each credit bureau. Credit repair companies, credit counseling services and credit counselors must take reasonable steps to help you rather than further harm your financial position. For example, credit reporting agencies need to allow consumers to file disputes and may not charge them to do so. 

Credit Report Organizations Act

The Credit Report Organizations Act (CROA) helps ensure that those organizations provide results like a higher FICO score. They should assist with credit utilization and red flags on your credit report related to identity theft. They should also explain concepts like credit utilization and hard inquiries to you. 

Credit counseling services should also inform you about legal rights related to your credit repair goals. The credit repair service providers may also handle disputes for you, once you authorize them to do so.

You also get help fixing credit through the CROA because it prohibits credit repair companies from certain behaviors. For example, they can’t make claims about how much they can improve your credit score. They also cannot charge advance fees. Instead, they must perform all their services before payment. 

You also have a legal right to sue a credit repair company up to five years after using its services if they fail to comply with the law or neglect to perform agreed-upon services. These can include helping with late payments, a bad credit score, and collection accounts.

State Assistance With Credit Repair

In addition to these federal statutes, many states offer their own credit repair laws governing companies and consumers within their borders. 

For example, California state law includes the  Credit Services Act of 1984. This act defines the roles and responsibilities of credit repair companies. Consumers using these organizations are also given the right to cancel their contract with a credit repair company within five days of signing it without any penalty or obligation.

Other states have similar laws for credit counseling companies. However, each state’s laws may differ in important ways. As a result, it’s important to verify your own state’s laws independently.  

Other Resources For Improving Your Credit Score

If you believe that a credit repair company is not acting in your best interests as it should—for instance, by disputing charges or identifying a scam on your credit report—then you can file a complaint with the Federal Trade Commission (FTC). Alternatively, you can seek assistance from your state’s Attorney General.

Finally, the Better Business Bureau can aid in your search for the best credit repair companies to help you turn your poor credit into good credit.

John Boitnott has been writing for TV, print, radio and internet companies for 25 years. He’s written for BusinessInsider, Fortune, NBC, Fast Company, Inc., Entrepreneur and Venturebeat, among others.

Feature Illustration: Laura Caseley For The Money Manual