Avoiding Credit Repair Scams

Credit repair scams are everywhere, from TV commercials to Internet ads. With so many out there, it is difficult to discern which credit repair companies are legitimate and which participate in fraudulent schemes. Before you hire someone to help repair your credit, consider the following six signs of credit repair scams:

1. The company asks for up-front payment.

This tactic is perhaps the most common credit repair scam, and it is also illegal. Under the Credit Repair Organizations Act (CROA), credit repair companies cannot accept payment before performing the work they’ve agreed to complete.

2. You are not advised of your rights.

All credit repair companies are required to inform you of your right to repair credit on your own. They must also provide you with a copy of the “Consumer Credit File Rights Under State and Federal Law” in addition to a services contract that outlines your rights and responsibilities.

3. You are discouraged from contacting credit reporting companies.

The three major companies, Experian, TransUnion and Equifax are responsible for handling dispute letters filed on your behalf. Just as you have a right to repair your own credit, you also have a right to contact those who change it.

4. The company claims they can erase all bad credit.

While it is your credit repair company’s job to help erase negative items that are false, no one can erase bad credit from your record if it is legitimate.

5. You are encouraged to assume a “clean identity.”

Scams often advocate credit repair by asking customers to obtain an Employer Identification Number (EIN) from the IRS. While this is not unlawful on its own, it is illegal to use this number to replace your Social Security Number.

6. The company claims FTC endorsement.

The Federal Trade Commission (FTC) is an independent government agency designed to protect consumers. The FTC does not support or endorse any credit repair company.

Credit repair can be a stressful and daunting process. You may be desperate to repair your credit, but don’t make yourself vulnerable to credit repair scams. Know your rights and if you choose to get help, find reputable credit repair companies that will work with your best interests in mind.