Credit report repair is more in demand than ever since the economy is on a long-term roller coaster ride, but finding the right credit repair service can be tricky. There are unscrupulous services out there that will take your money and deliver nothing in return.

As recently as a few months ago, the Federal Trade Commission (FTC) has been cracking down and charging criminal operations with accepting advance payments, which violates the Credit Repair Organizations Act (CROA), and deceiving consumers by promising to remove legitimately reported information from credit reports.

A good place to start your credit repair journey is to understand your rights under the CROA Credit Repair Organizations Act.

Pertinent Sections of the Credit Repair Organizations Act can be found in:

Section 404.4B – Prohibited Practices – Advance Payment – No credit repair organization may charge or receive any money or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform for any consumer before such service is fully performed.

Section 405.a – Disclosures – You have a right to dispute inaccurate information in your credit report by contacting the credit bureau directly. However, neither you nor any ”credit repair” company or credit repair organization has the right to have accurate, current, and verifiable information removed from your credit report. The credit bureau must remove accurate, negative information from your report only if it is over 7 years old. Bankruptcy information can be reported for 10 years.

Any person or business who takes money in exchange for improving your credit must operate under the CROA. You must sign a contract for services and you have 3 business days from the contract signing date to change your mind and rescind the contract. In addition, the credit repair organization not ask you to sign any kind of form which waives your rights under the CROA. Any such waiver you sign is considered void and cannot be enforced by federal or state laws.

Organizations that violate the law can be sued for actual damages, punitive damages, and attorney’s fees. You can report violations to the FTC, your state attorney general, and file suit in your state within five years from the date the violation occurred (or the date you learned of the violation) to take legal action against the organization.

The charges brought by the FTC on dozens of credit repair services serve as a reminder that credit repair companies are often dishonest and the dishonest ones seldom produce any results. In the end, you’re out of your money and your credit still needs repairing.

If you are a consumer who has hired a credit repair company and had positive results, leave a comment about it so others can benefit.

Here are some additional helpful links: Credit Repair:

How to Help Yourself  http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm

How to Recognize a Credit Repair Scam http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm

Free Annual Credit Reports http://www.ftc.gov/freereports

How To Dispute Credit Report Errors http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre21.shtm

Lenders might be monitoring your money management behavior via your credit card spending — and certain purchases could cost you.

By BusinessWeek 

Most borrowers know a late payment or high outstanding balance can hurt their credit. But what about frequenting a massage parlor, retreading a tire or visiting a marriage counselor? Such activities count, too, according to a suit filed June 10 by the Federal Trade Commission in Atlanta federal court against card issuer CompuCredit.

Lenders, insurers, and other financial firms use credit scoring systems to make a host of decisions about consumers, including the interest rate on their mortgages, the limits on their credit cards and the monthly premiums for their auto coverage. Some rely heavily on FICO, a three-digit score developed by Minneapolis-based financial firm Fair Isaac, while others use proprietary models developed by statisticians. But companies don’t disclose what’s baked into their formulas, leaving many borrowers to wonder what factors determine their financial fate.

The FTC suit against Atlanta’s CompuCredit for allegedly “deceptive” marketing practices offers a rare look inside the opaque business of credit scoring. It reveals mechanisms that consumer advocates and politicians have long suspected exist — in which purchasing behavior, not just payment history, matters.

Punished For Purchases

The allegations, in part, focus on CompuCredit’s Aspire Visa, a subprime credit card for risky borrowers. The FTC claims that CompuCredit didn’t properly disclose that it monitored spending and cut credit lines if consumers used their cards at certain places. Among them: tire and retreading shops, massage parlors, bars, billiard halls and marriage counseling offices.”The company touted that cardholders could use their credit cards anywhere,” says J. Reilly Dolan, assistant director for financial practices at the FTC. “What they didn’t say was that you could be punished for specific kinds of purchases.” The Federal Deposit Insurance Corp. is also seeking $200 million in penalties from CompuCredit in the matter.

It’s not the first time CompuCredit has come under scrutiny from authorities. In 2006, the credit card issuer and another financial firm agreed to fork over $11 million to consumers and reform their marketing and billing procedures as part of a settlement with then-New York Attorney General Eliot Spitzer, who had launched a probe in 2005 after receiving various consumer complaints.

CompuCredit maintains that the FTC’s lawsuit is without merit, and defends its practices. “Every time a consumer accesses their credit, a new decision to extend a loan is being made,” says Rohit H. Kirpalani, CompuCredit’s general counsel. “These scoring models are commonplace across the industry.”

Video on MSN Money

Protection from credit card companies
If new rules proposed by the Fed are enacted, some of the credit card companies’ favorite sleazy tactics will be taken off the table.

With competition increasing, databases improving and technology advancing, companies can include more factors than ever in their models. And industry experts say financial firms increasingly are looking at consumer behavior, as CompuCredit did.The worry is that companies may tweak the credit scoring systems in unfair or biased ways, weeding out or limiting borrowers based on race, gender or sexual orientation. (In the case of CompuCredit, regulators are taking issue with the lack of disclosure, not specifically its use of behavior-based scoring.)

“We as consumers should become aware that behavior is used to determine our creditworthiness,” says consumer advocate Karen Gross, president of Southern Vermont College. “What CompuCredit portends is the (use) of information to create a more robust and potentially nefarious credit scoring system.”

This story was reported and written by Jessica Silver-Greenberg for BusinessWeek.com.

Published Aug. 8, 2008