If you’re too busy to go about your credit repair yourself or you have no idea how to go about it, your only option might be a credit repair company. A credit repair company is supposed to help you remove bad information from your credit report, replace it with good information, and leave you with a much better credit score, at a fee. But there is one thing you should know – credit repair scam is common in the credit repair industry. The industry is full of companies whose only goal is to scam consumers. Being desperate for better credit can leave you vulnerable to credit repair scams. Here’s what you need to know about credit repair scams.
Credit Repair Organizations Act
Credit repair organizations are governed by a law known as the Credit Repair Organizations Act. This federal law requires any credit repair service to fulfill certain obligations to you. Any credit repair company that doesn’t follow these rules is probably into the business of Credit Repair Scam.
Seven Signs of a Credit Repair Scam
Below are seven signs that can help you recognize a credit repair scam:
- Firstly, you are not given a copy of the “Consumer Credit File Rights Under State and Federal Law” letting you know your rights to obtain a credit report and dispute inaccurate credit report information. All credit repair companies are required to let you know that you can perform these services on your own.
- Secondly, You are not given a copy of the contract to view before you’re asked to sign it. Do not agree or pay for services before you know what you’re signing up for. Read through the contract to make sure it contains all the important information.
- Thirdly, the contract doesn’t contain the following information:
- The amount you are being charged
- Details about the services being performed on your behalf
- The date by which the services will be performed (or the time period required to perform the services)
- The name and business address of the organization
- A statement letting you know you can cancel the contract within 3 days
- Fourthly, you’re asked for payment before the services have been performed. The law prohibits credit repair companies from charging upfront fees. This is an area where many credit repair companies break the law; some companies may be unaware that they’re not supposed to charge customers upfront.
- Also, the company promises to remove accurately reported information from your credit report. Legally, this information belongs on your credit report, but credit repair companies sometimes try shady tactics (like having you claim identity theft) to remove accurate information from your credit report.
- Next, the company promises to create or asks you to create, a “new” identity with a new social security number or federal employer identification number (EIN). In one credit repair scheme, the credit repair company creates a new credit profile and you apply for all future credit products with that information instead of your old social security number.
- Lastly, you’re asked to sign a form waiving your rights under the CROA. Fortunately, the CROA voids any waiver of rights.
Are there genuine credit repair companies?
Yes. There are credible credit repair companies, just be aware of the danger signs to look out for. The Credit Repair Company should consult with you before discussing a strategy for your credit. No company can tell you exactly what they can do for your credit if they’re not aware of your credit history. A credible credit repair company will ask questions about your credit history and may even view your credit reports before talking about what it will do.
If a company sounds too good to be true, there’s a very good chance that it isn’t true. Before you use a company’s credit repair services, do some research with the BBB, FTC, and your state attorney general to find out if there are any existing complaints. Avoid companies that consumers have already complained about.
What to Do If You’ve Been Scammed
Don’t let a company get away with a credit repair scam. Take action if you feel your rights have been violated. Start by reporting the organization to your state attorney general. You can visit the National Association of Attorneys General’s website to find an attorney general in your state. Send a complaint to the Federal Trade Commission, the Better Business Bureau, and the Consumer Financial Protection Bureau.
Lastly, consult with an attorney. You may be able to file a lawsuit against the credit repair company. This won’t fix your credit, but you may be able to get back the money you paid for the services.