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Protecting Yourself From Credit Repair Scams

Don’t be a victim of quick fix credit card repairs and other shady offers that sound too good to be true. Here’s how to recognize and protect yourself from credit repair scams.
In an economy where more and more people are struggling than ever to survive personal financial disasters, advertisements for repairing credit can be very tempting. No matter where you look – TV, the Internet, or radio, there’s always an offer that claims they can miraculously pull you out of your credit slump. The truth is, if there were a quick easy fix that cured credit woes, wouldn’t everyone be doing it? Then again, there are a few credible credit counseling agencies out there that can indeed assist you in clearing up your financial issues. But, in order to find them you’ll need to do proper research and cautiously pick one that offers helpful individualized services with a trained knowledgeable staff. 

How to Identify a Credit Repair Scam

Whether it’s a service, a DIY guide, or even work-at-home software to start your own credit repair business, be highly suspicious of any company that promises (for a fee) to clear up and repair your credit report. No one has the legal right to remove timely and accurate data on anyone’s credit report. Here are a few signs that should send up a red flag regarding an offer to repair your credit:
  • The company’s offer claims it can eliminate most of or all of the negative data in your report, even if the data is current and correct. A consumer reporting agency is able to report the majority of correct negative data for up to seven years and up to ten years regarding bankruptcy information. 
  • The offer demands that you pay for their repair services up front, before they take any action on their part. Under the Federal Credit Repair Organizations Act, companies that repair credit cannot legally demand payment until the services they promise to deliver are complete. 
  • The offer advises you to dispute all the data in your report, despite the fact that it’s accurate. The offer claims that it can guarantee results. If a company claims they can guarantee the ability to delete your negative credit data that is outdated or inaccurate, that is in fact illegal. 
  • The offer suggests that you create a whole new identity, followed by a new credit report by applying for an EIN (Employer Identification Number) to use in place of your regular Social Security Number. It is highly illegal to provide false information on a loan and/or credit application, to obtain an EIN from the IRS under false pretenses, or misrepresent your Social Security Number in any way. 

Know and Understand Your Rights About Credit Repair

If you respond to a company’s offer in order to repair your credit, know and understand your rights:
  • You have the legal right to cancel an active contract with an organization that promises to repair your credit for any reason up to three business days starting from the date the contract was originally signed. 
  • Prior to signing a contract, an organization that promises to repair your credit must include a copy of a full-page document that clearly states the consumer’s rights in disputing incorrect data on their report, and also their rights when interacting with organizations that claim to repair credit. 
  • Prior to offering their services, any organization that promises to repair credit must include a formal written contract that clearly states the consumers’ rights and obligations. 
  • Any organization that promises to repair credit cannot legally charge a consumer until the services they promise to deliver are complete. 

Self-Improvement Information to Repair Credit

Federal law permits an individual to request an investigation of the data in their credit report that they consider incomplete or inaccurate – free of charge. While a few people prefer to hire a professional to analyze it on their behalf, most everything an organization can legally do, you can likely do yourself as well for little to no money. 

Selecting a Good Credit Counselor

Good credit counseling can literally save you financially if it’s performed by a trustworthy and sound organization. With the right credit counselor, you’ll gain helpful knowledge on how to successfully manage your finances. However, because consumer debt is on the rise, scandalous credit counseling offers are on the rise as well and can in fact leave you in a far worse financial mess than before. Be wise and wary when choosing a credit counseling service by checking them out first. Here are a few guidelines:
  • Thoroughly go over any written documents and agreements that the organization claims they can provide. It should clearly describe each of their detailed services including the payment terms, the timeframe to achieve results, any listed guarantees, the total cost for their services, and the organization’s official business name and address. 
  • Check with your local area BBB (Better Business Bureau) in order to learn about a particular credit counseling organization’s track record. How many unsatisfied consumers and complaints have they had?
  • Ensure that the organization can actually assist you in managing your finances more efficiently through proper instruction and counseling. If possible, seek an organization that provides one-on-one, in-person counseling services. 
  • Avoid any offers that you receive out of nowhere via email, direct mail, telephone calls, or any offers that make phony promises that appear too good to be true. Promises like “getting you out of debt easily” or “settling your debt” for virtually no money are clearly scams and should be avoided. 
  • Be cautious of unusually high fees or necessary voluntary contributions that, along with a high monthly service fee, will only add to your debt and therefore ruin all your hard work you’ve done already trying to pay off your bills. 
  • Make certain that the agency you select is one that your creditors are willing to work with. If they will work with them, regularly follow up with your creditors to ensure your debt in continually getting paid down. 
  • Perform your own independent research and validate any company you’re considering working with. 

You’ve Already Been Scammed: Now What?

For your own sake and others, do not let these shady organizations get away with scamming you. If you feel that your rights have been violated, don’t hesitate to take action. The first step is to report the said company to your State Attorney General so they can be stopped. Next, send a formal complaint to the BBB (Better Business Bureau) and the FTC (Federal Trade Commission) and report the supposed company. 

In Conclusion

It’s in your best interest to do your homework and check with the FTC, BBB, and your state’s Attorney General to investigate if there are any current complaints concerning the organization you are considering hiring before you actually commit to using their services. Stay clear of any company that consumers have previously complained about or ones that have a dishonorable reputation. 
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Alice Bryant's picture

Alice Bryant is the Editor of Creditnet and a personal finance expert with over a decade of experience writing about credit cards, credit scores, debt repair, and more.

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