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Credit Repair Scams Consumer Beware
You’re deep in debt – afraid to answer your phone because you’re getting a lot of collection agency calls. You start to think bankruptcy might be a way out, but you see a credit repair company ad on Facebook promising they can remove bad credit and give you a new credit identity. If it sounds too good to be true, you would be right…it is.
There are a lot of good credit repair companies that help by providing information on how to add positive credit, how to optimize your current accounts and will help you dispute inaccurate and negative items on your credit report. Choosing a scam credit repair company will not only leave you with the same credit profile, but you may find yourself in illegal territory.
Here are the top 10 warning signs of a credit repair scam.
1 Company has no physical address- Reputable companies will have a physical location where credit repair work takes place, if there’s no physical address, assume they have something to hide.
2 Won’t disclose how they will fix your credit- You should know exactly how the credit repair company will repair YOUR credit. If their response to your questions is “trust us, we’ll get it done”, you shouldn’t trust them.
3 Big upfront payment and cash only– It’s common for these companies to convince you to pay all the money up front so they’ll have all your money by the time you realize you’ve been gamed. If they’re requiring you to pay in cash, it’s because it’s harder to get your money back and is untraceable.
Teresa Torris of mortgage lender, PRMI, says consumerfinance.gov states: “The credit repair company may not request or receive fees until it gives you a credit report generated more than six months after the promised results that shows the results. Under the federal Credit Repair Organizations Act (CROA), credit repair companies can’t request or receive payment until they’ve completed the services they’ve promised. Some companies will structure monthly payment plans to try to avoid this requirement. You should know that all forms of upfront payment before services are completed are illegal.”
4 Claims they can create a new credit file- Some credit repair scammers will claim they can trick credit bureaus into creating you a brand-new credit report minus the negative items. They may suggest you get an Employer Identification Number (EIN) to use in place of your social security number. What they won’t tell you is it’s a federal crime and could end up in jail by using this new credit report and using an EIN under false pretenses.
5 They have knowledge of a secret loophole- A legitimate credit repair company will tell you that there is no secret knowledge or any special buttons they press to magically optimize your credit file. If a company tells you otherwise, don’t hire them. You have access to the same options and resources they have. People use credit repair services because they simply don’t want to do the work themselves.
6 Say they can remove bad credit- Keep in mind that you can’t legally remove current and accurate information from a credit report, no matter how bad it is. While many credit repair companies have refund policies if they don’t remove a certain amount of incorrect negative credit items from your reports, you must be cautious if they promise to remove a bankruptcy or late payments. Even if it’s an error, there’s still no guarantee they can remove it, because it’s up to the credit bureau if anything will stay or go.
7 Company won’t give you a contract- Federal law requires that you have a signed contract with the name of the company and address, a complete list of services the credit repair company will perform, how long it will take for the results and any applicable guarantees, the payment terms for the services and total cost and when the fees are collectible. You may cancel this contract within three days of signing it and without having to pay a cent for any reason. Be sure to get everything in writing before signing up for a credit repair service.
How you are protected
The CROA helps protect you from credit repair-related scams. Credit repair companies can’t make false claims about its services, they can’t require you to pay before the services are complete and require that no services are performed until you sign a written contract.
How to fix your own credit
There are some good credit repair companies (super heroes to your credit), but everything they can do, you can do at minimal to no cost. You can be your own credit super hero by doing the following:
Dispute outdated items or errors for free
Ask for a free report within 60 days of being denied a loan, employment, insurance or new credit
Get a free copy of your credit report once every 12 months from each of the national credit reporting agencies or going to a central site the big three credit bureaus, Equifax, TransUnion and Experian, set up at annualcreditreport.com, or calling 877-322-8228.
Lawyers.com. Avoiding Credit Repair Scams
With more than a decade of experience, LaDawn enjoys educating first time home buyers, working with the 55+ community, relocation clients, sellers who want to downsize, step up purchase or anything in....