Many consumers wonder is credit repair legal? YES, actually it’s your right as a consumer to make sure your credit report is accurate, so there is nothing illegal about it!
There is also a huge misconception that credit bureaus are some type of government entity, they are not. In fact your local bar is just as much of a government agency as a credit bureau. A credit bureau is a business pure and simple, they have one purpose, which is to make as much money as possible. They don’t want to help you- they just want to make money! Making sure you have a low score helps them make cash, how?
Credit bureaus are essentially a lead source for lenders. They get paid by lenders so they can run your credit files when you want credit. They also sell thousands of leads everyday to lenders all over the country.
You know those “pre-approved” credit card offers you get in the mail? Well those are directed to your mail box from information sold by the credit bureau to the credit card companies.
I’ll give you one guess what type of consumer commands the highest lead price?
No it’s not the ones with excellent credit, they already have a good credit card and probably have money! You guessed it, lenders earn the highest profit off consumers with bad credit! Why?
If you have between a 580-680 you are the most profitable client for a credit card company or lender because you can still qualify for a loan and usually your willing to pay high interest for the privilege.
You might think this sounds crazy, aren’t those with bad credit a higher risk? Well not really because these lenders take out insurance to cover their loss in the event you don’t pay. If you have over a 600 FICO score they can get insurance on your account. Then if you don’t pay they collect the insurance and sell the debt! When you take into consideration the high interest rates you will pay most likely the lender would never lose a cent on your account.
Lets compare the lenders income possibilities for the following clients:
Good credit: Paying Bills on time, low interest rates, no late fees, low risk but low profit as well!
Bad Credit: Paying late fees, paying higher interest rates, needing more credit, cash advance fees. Higher risk but way higher profits!
As you can see over the life of the customer the bad credit client will always be more profitable. So its sad but the credit bureaus actually have an incentive to keep your score low!
You have the legal right to challenge anything you might feel is not accurate on your credit report. There have been laws written regarding your credit: how it’s reported, how long it can be reported, the accuracy of the reporting, and so much more. These laws are written to PROTECT THE CONSUMER!!!
Here are the main groups of laws and a short description of some of what they do:
The Fact Act (FACTA) – This act entitles you to a free credit report every year. It also forces the credit bureaus to disclose the factors that are affecting your FICO scores.
The Fair Credit Reporting Act (FCRA)-This act forces the credit bureaus to maintain accurate information on all its clients.
The Fair Credit Billing Act (FCBA) – This act is for original creditors. It forces them to bill correctly, notify the consumer correctly, handle disputes properly, and report accurately.
The Fair Debt Collections Practices Act (FDCPA) – This act is for debt collection companies. This act spells out exactly what collectors can and cannot do when attempting to collect a debt.
So as you can see credit repair is totally legal. It’s your right to make sure you have an accurate credit report. Have you been denied for a loan? Are your interest rates too high? Well its only for one reason, your credit report! You owe it to yourself to make sure the information is accurate.