How to Spot a Credit Repair Scam

Credit repair companies are all over the Internet and offered through other credit minded organizations, but can credit repair really be bought and sold and do the practices used and promised really work? The short answer is no, but why? Instant credit repair, a new credit identity and a chance to start over all sound amazing, but the reality is that just isn’t the way credit works. Credit is built slowly over time as is the repair of financial mistakes made.

There are many credit repair organizations out there who offer to fix bad credit or boost good credit all for a fee. In reality, you could pay hundreds, even thousands, of dollars just to find out you’ve been victimized or to end up with worse credit. Most of these organizations are a fly-by-night operation that preys on those who are unknowledgeable or desperate about their current credit situation. When considering whether or not to use a credit repair, or other credit, organization you must do an immense amount of research and they should still be offering you something for nothing, instead of demanding a large upfront payment with no proof of what they claim to be doing. These fly-by-night companies will often have an exciting and energizing web site full of “testimonials” of people who have had success with them, but the testimonials are often fake and you will be hard pressed to find any real information about the company, the people who run it or the level of expertise they have in the financial industry.

There is a fine line between credit counseling and credit repair. Credit counseling offers quality products and services designed to help you work to overcome your financial mistakes. These companies are often non-profit organizations or for-profit with extremely low or no fees for their services. They work to help you learn your mistakes and the proper ways to go about correcting, changing or bouncing back from the negative reporting on your credit report. Credit repair organizations often claim to completely remove negative reporting, making the accounts and mistakes like they never existed and that is just not possible.

It’s important to remember that though it’s impossible and illegal to just remove information from your credit report, you do have a right to dispute items that are incorrect or have not be updated accordingly. This can be done through a dispute process, one of which each of the three major credit reporting agencies has, and companies have thirty days to respond to the dispute and either object or comply. Credit counseling agencies are designed to help you with this process and know the law, the Fair Credit Reporting Act, which surrounds this process. Credit removal or repair companies often do not know these regulations or try to convince you there are ways around it.

While, credit repair organizations have been around for years and some continue to get away with their unlawful, shady practices, the FTC (Federal Trade Commission) is on to them and has set up multiple investigations because of the high number of complaints by the consumers who have fallen victim to these companies. The FTC launched Project Credit Despair which has been successful in capturing twenty so-called credit repair companies since its inception.

To avoid getting caught in a credit repair scam there are distinct warning signs to watch for. These include companies that request payment before they provide the services. This is against proper credit practices and a credible company will not ask for payment until the services have been completed. Companies must also inform you of your legal rights and tell you what action you can take yourself for free to help correct your incorrect credit reporting. They should never recommend for you to NOT contact credit reporting agencies directly you have this right and should use it. They may also recommend you start a new credit identity by applying for an EIN (Employer Identification Number) to use instead of your social security number. This is unlawful and an extremely bad idea. These are all red flags to watch for when trying to avoid a credit repair scam and should be reported immediately if you come across them.

Good credit is a privilege, not a right and you should learn how to earn good credit and correct inaccurate information, but the only true way to good, solid credit is to pay off your bills and plan for a better credit future by paying bills on time and only opening accounts you can pay off each month. Credit is extremely important and regardless of what scam companies may tell you, you only have one credit report and score to work with.

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