Is it possible to repair bad credit? Can you really improve your credit score? The answer to both questions is yes, but it will take hard work and time. Be wary of any credit repair company that claims it can “fix” your credit quickly and easily.

If you’re considering working with a credit repair company, first learn about the Credit Repair Organizations Act (CROA). The federal law governs the business and advertising practices of companies that market credit repair services. CROA identifies a credit repair organization as any person or organization that markets itself as providing services or actually provides services to improve a consumer’s credit record, credit history or credit rating. The law excludes tax-exempt non-profit organizations, creditors trying to help a borrower restructure a debt owed to the creditor, and banks or credit unions.

Under the law, credit repair organizations may not:

• Intentionally tell you false or misleading information.
• Offer to change your identification – such as give you a new Social Security number.
• Give false or misleading information to creditors, credit reporting agencies or anyone else involved in settling your debts.
• Commit fraud to repair your credit.
• Ask you to pay in advance for their services.

CROA also requires credit repair companies to provide consumers with a specific written statement of their rights, and clear contracts that spell out what the company will do and what the consumer will pay for their services. The Federal Trade Commission enforces the law and consumers can file complaints with the FTC and sue any credit repair company that they believe violates the act.

The FTC cautions consumers to be aware of red flags that an offer of credit repair may be a scam. Watch for advertising promises that:

• Say credit problems are “no problem.”
• Claim the company will remove accurate negative information such as bankruptcies, judgments or tax liens from your credit file.
• Purport to “erase” bad credit.
• Offer a “guarantee” of results.
• Claim they will create a new credit identity for you.

Credit is a highly regulated industry with very established processes. Whenever you’re working toward better credit, it’s important to remember two fundamental facts: repairing your credit will take time and hard work, and there’s nothing a credit repair company can do for you that you can’t also do for yourself for free.