The Credit Repair Organization Act (CROA) was passed to protect consumers and provide them with recourse if they are victimized by a dishonest credit repair organization.

When researching credit repair services, there are some key indicators that should warn you to stay clear. According to the Federal Trade Commission, avoid credit repair organizations that:

Request Payment Before Services are Performed - Credit repair companies shouldn't request payment they have worked on your case. Under the CROA, these credit repair companies cannot require payment until they have completed the services promised. This is to protect consumers from companies that charge large upfront payments and then never do the agreed upon work.

Fail to Disclose Your Rights - Legitimate credit repair providers will let you know that you have a right to order one free copy of your credit reports each year from each of the credit reporting agencies, and that you can dispute inaccurate or questionable items on your own. If you are not alerted to this information, specifically in the form of a CROA required disclosure titled "Consumer Credit File Rights Under State and Federal Law", you should probably look elsewhere.

Endorse Using a New Identity - Some shady credit repair companies will actually go so far as to advise you to create a new credit identity by using an Employer Identification Number (EIN) in place of your Social Security number on credit applications. This is a serious crime and if anyone suggests this as an option, run the other way.

Lie About Services They Provide - Beware of credit repair services that promise to remove negative and accurate items, such as liens and foreclosures, from your credit file. No one can guarantee that items will be removed, especially if the items are true.