Credit glossary
Credit Repair Organizations Act (CROA)
The federal law at 15 U.S.C. 1679 that regulates companies selling credit repair and protects the consumers who hire them.
CROA bars credit repair companies from charging before they've fully performed the promised services, requires a written contract with specific disclosures, and gives you 3 business days to cancel without penalty (15 U.S.C. 1679b, 1679d and 1679e). It also makes it illegal for anyone to make, or advise you to make, an untrue or misleading statement to a credit bureau about your creditworthiness.
That last rule reaches further than people expect. Advising a client to claim that accurate accounts aren't theirs, or to file a false identity theft claim, can violate it. The FTC has used CROA against a company selling authorized user spots as a credit fix, and it says consumers can do everything a credit repair company does for free.
Guides that go deeper
- Spotting credit repair scams: the FTC's red flags and your CROA rightsFederal law bars credit repair companies from charging before the work is done. The FTC's warning signs, what a legal contract must say, and how to cancel.
- Credit repair companies vs. doing it yourself: what you're paying forCredit repair companies use dispute rights you already have for free. What federal law requires of them, what the work involves, and the red flags.
- Buying tradelines: how rented credit works and where it backfiresPaying to be an authorized user on a stranger's card can move some scores briefly. How FICO, mortgage underwriters and regulators treat it.
Sources
- 15 U.S.C. 1679b: Prohibited practices, Legal Information Institute, Cornell Law School
- 15 U.S.C. 1679d: Credit repair organizations contracts, Legal Information Institute, Cornell Law School
- 15 U.S.C. 1679e: Right to cancel contract, Legal Information Institute, Cornell Law School
- CROA case shows why piggybacking isn't the answer for consumers shouldering bad credit, Federal Trade Commission
- Fixing Your Credit FAQs, Federal Trade Commission
This is education, not legal or financial advice. Spot an error? Tell us and we'll fix it.