Credit Repair Scams And How To Avoid Them

Everyone by now has probably gotten at least one email, junk mail, or other type of solicitation concerning Credit Repair. The truth is that around 80% of Americans have credit issues they need to deal with so there is a huge market for credit repair services.

But with every large market there is one thing you can be sure of. It will also draw out the unethical people and the scammers and thieves as well. In this article I will tell you about some of the scams and offer you a little free advice on how to avoid credit repair scams and rip-offs.

The first thing that should be discussed is that anytime something sounds too good to be true it most likely is. When you hear or read the words, “Free”, you should beware. My own website has the word free in it because I actually provide free information. However, if you were to want me to do all that is necessary to repair your credit, you can bet you’d have to pay me for the service.

So, when you see someone offering to fix your credit for free, ask yourself, “How can anyone work for me for free?” Some claim to be a nonprofit organization only there because they are interested in helping people fix their credit.

There may actually be one out there that does this and if you ever dig them up email me a link. For the most part I would be even more leery of those that claim to be a nonprofit. Even the federal government is now looking into credit repair organizations that claim to be nonprofit.

What these companies or credit repair clinics do is something you can do for yourself. They dispute claims by creditors. You can do this by going to the big three, Equifax, Experian, and TransUnion Corporation. If the creditors fail to respond within 30 days, then the item is removed from your credit report.

Sounds great right? Well, not exactly. Even if the creditor fails to respond in the 30 day time period, they can still add the item back onto your credit report. That means that the money you paid for someone to do that for you was wasted. You can get a free credit report from each of these companies once per year. So that is three times per year that you can check up on your credit report.

According to the Federal Trade Commission Website, “A federal judge has ruled that a bogus credit repair company and its owner violated the law by making false and misleading claims, and billing in advance for its services, and has ordered them to pay more than $322,000. This action was a result of “Project Credit Despair,” a crackdown on 20 operations that deceptively claimed they could remove negative information from consumers’ credit reports – even if that information was accurate and timely.”

If the information on your credit report is accurate and timely, there is no one that can get that removed for you. The best thing you can do in that case is to contact the company and make some type of arrangements to pay off the debt. Offer a cash settlement that is less than the total amount owed and sometimes they will help you and take the offer. You have nothing to lose by making that offer and everything to gain.

The FTC advises that only time, a conscious effort, and a personal debt repayment plan can improve your credit report. The first step is to learn what information is in your credit report. If you find errors or mistakes, federal law gives you the right to have them corrected – free of charge. Federal law requires that the nationwide consumer reporting companies – Equifax, Experian, and TransUnion – provide you with a free copy of your credit report once every 12 months, if you ask for it. To order your free report, visit annualcreditreport.com, call 1-877-322-8228, or complete and mail the Annual Credit Report Request Form. Other credit repair information is available on the FTC’s Web site, http://www.ftc.gov.

I hope this article has helped you to understand about credit repair. There are some legitimate companies out there. Just beware of any that tell you that they can remove items from your credit report that are legitimate debts. If they offer to negotiate directly with creditors or help you consolidate your debt, then you may benefit from using professionals. However, on the debt consolidation part, watch that you do not end up paying a higher percentage for interest than you are currently.

Questionable Credit Repair Offers

If you have a bad credit record, you know how hard it can be to secure new credit or seek new employment.  While you may be willing to do whatever it takes to repair your credit rating, some companies not only offer illegal advice or methods, but also misrepresent what they will be able to accomplish.

There are many other individuals and organizations the law does allow to provide you with credit repair assistance.  Lenders, banks insured by the FDIC, and nonprofit organizations can give you credit repair advice.  In some situations, a real estate broker, attorney or registered financial advisor may also advise you.

 Questionable Credit Repair Offers

You have seen plenty of ads full of promises like these:

“Credit problems?  No problem!”

“We can erase your bad credit--100% guaranteed.”

“Create a new credit identity legally.”

“We can remove bankruptcies, liens, judgments and bad loans from your credit file forever!”

Unfortunately, these companies cannot live up to their promises.  Even after you pay hundreds or thousands of dollars in up-front fees, your credit will be no better.  No one can remove correct information from your credit report, even if it negatively reflects on you.

If you decide to respond to a credit repair offer, beware of companies that:

 - Want you to pay for services up front;

 - Do not tell you your legal rights or what you can do for yourself at no cost;

 - Recommend that you not contact the credit bureaus directly;

 - Suggest you get new credit by using someone else’s Social Security number or by applying for an Employer Identification Number; or

 - Advise you to dispute all information on your credit report.

The Social Security Act prohibits misrepresentation of your Social Security number, and the Identity Theft and Assumption Deterrence Act makes it a federal crime to knowingly use another person’s identification with dishonest intent.  Further, it is a federal crime to make false statements on a credit application or to obtain an Employer Identification Number from the Internal Revenue Services under false pretenses.  You will be prosecuted by the federal government for these crimes.

Federal law also imposes certain limitations on credit repair companies.  They may not:

 - Make false claims about their services.

  - Charge you until they have completed the promised services.

 - Perform any services until you have signed a written contract and a three-day waiting period has passed, during which you can cancel your contract with no fees.

Other practices that may violate the Georgia Fair Business Practices Act include:

 - Promising to remove negative but accurate information from your credit report.

 - Offering to establish a new credit identity for you, an illegal practice known as “file segregation.”

 - Encouraging you to stop making payments to your creditors.

 - Telling you to ignore the IRS, collection letters or other legal documents.

If a credit repair company is able to obtain a credit card for you, often this is a “secured” bank card that requires you to pay a high application fee and deposit several hundred dollars in a bank account, or a card for a small and unfamiliar company or catalog.  If you want a secure credit card, you can get it on your own.

Your Contract

When you sign a contract for credit repair services, you should know what to look for.  The contract must specify:

 - The payment terms, including total cost;

 - A detailed description of the services to be performed;

 - How long it will take to achieve the results;

 - Any guarantees they offer; and

 - The company’s name and business address.

Filing a Complaint

It is very important to report any credit repair companies that take advantage of you, so they can be stopped.  Since most credit-protection laws are enforced at the federal level, you should contact the Federal Trade Commission (FTC) when you have a complaint about a company offering credit repair services.  While the FTC does not handle individual cases, it can act when it sees a developing pattern of possible legal violations. 

You may send your complaint to:

FTC Division of Credit Practices
6th Street, NW
Washington, DC 20580

Credit Repair Scam Tips

There are credit counseling services that are free of charge. Check into those.

Check with the Attorney General's office and the Better Business Bureau for complaints filed on company.

If you are asked to sign a contract, Make sure you read and understand before you sign; there could be hidden charges, etc.

Check with your creditors to make sure that the creditors will work with this agency.

Be leery of companies that promise to repair your credit. These companies can not do anything that you can't do yourself to repair your credit.

Check with the company to make sure that you will have access to payment records for payments made on your behalf.

There are several ways these credit repair scams claim they can help. For a fee they will offer to:

Clean up your credit record. Only you can do this, and it takes time, patience and a personal repayment plan. No one else can speed up the process or do it for you.

Offer you a Visa or Master Card even if you've been turned down by banks. Sometimes you must call a 900 number at a cost of $25 to $50, and you still may not receive a credit card.

Show you how to apply for credit with a new tax ID number, usually an EIN. (Employer Identification Number, used by businesses to report financial information to the government.) This is called file segregation (creating a new credit file separate from your old not-so-good credit report.) Not only is it illegal to apply for an EIN under false pretenses, if you obtain the new number through the U.S. mail or by telephone, you may be charged with mail or wire fraud and face fines and/or jail.

Ways to improve your own credit rating:

Obtain a "secured" credit card from a major bank and make the payments on time every time.

Make sure any mistakes on your credit report are corrected. The credit bureau can tell you how, at no cost to you. However, there is nothing anyone can do about negative information that is accurate. It cannot be "erased." Only timely payments for an extended period will help.

Contact a non-profit credit counseling service in your area.

If you realize you can't pay your monthly bills, contact your creditors immediately and arrange a payment plan.

Remember, there is nothing a credit repair service can do for you that you cannot do for yourself for free. It just takes time.

Credit Repair Scams

Credit repair scams target worried or desperate consumers who want to believe they can restore their good names. Indeed, there are ways to improve credit scores, but they take time, reliability, and effort. Paying a large fee to a third party will never accomplish any benefit.


Imagine finally being able to buy that new car, get debt collectors off your back, and enjoy a new found freedom from your past debts.

Sound to good to be true ?  It probably is.  Once you fall prey to the credit repair offer and pay the hefty fees involved to clean up your record, here’s what happens:

1) The credit repair scam artist contacts the credit bureaus and reports that the negative information in your file is false.

2) The credit bureau removes this negative information from your report while they investigate the claim.

3) The scam artist will then show you the cleaned up version of your credit report and “ta-da”  your credit history has been fixed !

But here’s what the scammer doesn’t tell or show you.  After the credit bureau completes their investigation the negative information is placed back on your credit report.

Negative but accurate information cannot be removed from your credit profile.  Only incorrect information can be removed.

Accurate information remains on your credit file for a period of 7 years from the time it is reported to the credit agencies;  a bankruptcy appears for a 10 year period.

Many legitimate companies exist that can help you with your debt problems.  But how do you spot a scam offer ?  Easy, they’ll ask you for their fees up front.  By law, credit repair agencies cannot ask for payment until they’ve provided the service they promised.

Additionally many states require that a credit repair service, whether they are for-profit or not-for-profit, must provide you with a detailed written contract, an explanation of your legal rights, and the opportunity to cancel any signed contract within 3 days.

Also, be aware that a “credit repair offer” could be an attempt to steal your identity by getting you to provide personal information such as a Social Security number, bank account and credit card account numbers.

Always make sure you know who you are dealing with before accepting any offer to help you repair your credit.  Those who don’t can have their credit ruined further and create more debt problems.

Avoiding credit repair scams is easy.  All it takes is a thorough internet search and careful reading of what the credit repair company has to offer. The moment you see that there is some form of guarantee that your credit repair can be fixed overnight, you should think twice. Remember, credit repair can never be done in a jiffy. It will always take time and patience. A legitimate credit repair company will tell you straight away that credit repair is and will never be an overnight process--there is no miracle cure for poor credit.