How to Spot a Credit Repair Scam

By Andrea Cannon on 8 June 2016 0 comments

When your credit has taken a significant hit and you need professional assistance, a credit repair company can do wonders for your financial situation. They can help you get your credit back on track and even work to remove errors from your credit report that may be affecting your score. In turn, this can help you more easily qualify for a loan or credit card.

However, just as there are people out there who want to help you, there are also people who want to take advantage of your situation for profit. That's why we've provided some of the top signs to help you spot a credit repair scam before you, too, become a victim.

They Ask for Money Upfront

The FTC prohibits agencies from requiring money upfront, before the work is done. Any company that asks for money upfront before providing services is likely trying to get your financial information.

They Provide a New SSN or EIN

Credit repair companies may require your Social Security number. What is not necessary is an employer identification number. If the company requires you to apply for a new employer identification number, this is a good indication that they may be scamming you.

Some companies may also provide you with a new Social Security number and suggest that you apply for credit using that new number. This is illegal and you are likely using a stolen Social Security number (often from a child), so you should report the company immediately, before you are involved in an identity theft scheme. Often, the agency will claim that they can provide you with a "new credit identity" using this method, which is a red flag.

They Encourage You to Lie

If the company encourages you to misrepresent yourself, this is a huge red flag. For instance, according to Credit.com, some agencies may encourage you to sign an identity theft affidavit, even if you weren't a victim of identity theft. By misrepresenting yourself, you are only putting yourself in danger.

They Make Lofty Promises

Any information that is correct on your credit report will stay there. This means that accurate reporting like bankruptcy, judgments, and liens will remain on your credit report. A company shouldn't promise to have them removed. If they make these types of impossible promises, they are likely running a scam. If they have aggressive advertising that makes promises in regards to the results they can achieve or how much your credit will recover, then you should steer clear.

They Discourage You From Taking Actions

If they discourage you from contacting any of the three national credit reporting companies directly, run the other way. If they don't inform you of your legal rights and what you can do for free to repair your credit on your own, then they aren't a trustworthy organization.

They Can't Explain Their Services

The agency you are working with should be able to clearly explain in detail what the services are that they'll be providing. If they simply make a claim as to the results they will achieve, or how long it would take them to achieve those results, then you never know what you're getting into. For instance, if they guarantee you will see results in 48 hours, you should know that nobody can make these claims confidently, so they can't be trusted.

They Don't Provide a Clear Contract

A reputable agency is required to provide a contract that clearly describes the services being offered and the total cost of services. It should also clearly state the name and business address of the agency.

You have the right to cancel the contract within three days without incurring any fees, thanks to the Consumer Credit File Rights Under State and Federal Law. You should also be provided with a copy of these Consumer Credit File Rights upfront. If the company fails to inform you of these rights, run the other way.

They Don't Care About Your Story

Any reputable agency will want to know about your credit history, what the issues are, and what your credit reports look like before discussing their services. If they don't care to know your backstory and start making promises right off the bat, this is a warning sign.

They Ask You to Waive Your Rights

You have rights under the Credit Repair Organizations Act (CROA), which is enforced by the Federal Trade Commission (FTC). If the company asks you to waive these legal rights, then you should steer clear.

You Can Do It Yourself

There are certain effective steps you can take on your own to improve your credit score. Taking these steps on your own will require some time and effort, but won't cost you anything.

If you decide to work with certain credit repair companies, consider first looking them up on the Better Business Bureau (BBB), Federal Trade Commission, and your state attorney general's office to find out if there are any outstanding complaints against them. (See also: How to Rebuild Your Credit in 8 Simple Steps)

Do you have any experiences with credit repair companies? Were you the victim of a credit repair scam? Please share your thoughts in the comments!

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Guest's picture
Dave Schram

Per the California Attorney General's Credit Services Organization's (CSO) oversight person I own the only credit repair firm in CA which follows all federal and state laws.

My nationally known Fair Credit Reporting Act lawyer-litigator and I are baffled as to why the Federal Trade Commission does not shut down Lexington Law for their practices of illegally disputing accurate bad credit. (Violates Consumer Credit Protection Act).

Aside from being illegal, disputing bad credit is a fairly low success rate tactic AND sets up the person disputing for an allegation of the Bank Fraud statute. This is why I will never let my firm dispute an accurately reported piece of credit.

Instead we get our results by being 100% truthful and honest and we use tactics I thought up and ran by my lawyers for legality.

A Chase employee got fired a couple years back for hiring a company to dispute his accurate bad credit!

I sleep easy at night. I get great results lawfully and my clients, including many lawyers, loan officers and Realtors love me. I protect their licenses.