Credit Repair and the Tools of Ignorance

The first was the upfront fee. Under the federal Credit Repair Organizations Act -- enacted to address deceptive and abusive credit repair business practices -- it is illegal for companies to charge consumers money before performing the promised credit-repair services. Credit-repair companies cannot seek payment from you until they have completed the services they have promised.

Next, the company said it could permanently delete accurate, negative information from the couple's credit files.

That's a lie.

While you can dispute information in your files that you believe to be false, no credit-repair company or individual has the right to remove accurate, current information from a credit report. If the information in your file is correct, only the passage of time can reduce the impact of a negative report. Negative information such as late payments can stay on your credit file for seven years. A personal bankruptcy filing can take 10 years. But don't despair. The impact of that information on your credit scores is less as the years go by.

Finally, after much discussion, the couple said they would cancel the contract, although I wasn't totally convinced they would.

If you're thinking about responding to a credit-repair offer, you should at least know your rights. The Federal Trade Commission says consumers should look for the following warning signs and avoid any firm using these terms:

¿ The company requires an upfront fee.

¿ The company says it will dispute all information in your file, including things you know are correct. On that last point, you should know better. If the company's strategy is to lie or dispute accurate information, it's not a reputable operation.

¿ Before you sign a contract, the company does not provide you with a copy of the FTC's "Consumer Credit File Rights Under State and Federal Law," which outlines what is permissible.