Avoiding Credit Repair Scams

If you have less than perfect credit, you’ve probably seen advertisements for credit repair services.  In newspapers, TV, radio, and on the Internet credit repair services claim to be able to remove bankruptcies, create new credit identities, and even erase bad credit. ...continued below

Unfortunately, many of these credit repair companies exist only to cheat money out of their customers.  After you’ve paid them hundreds of dollars in fees, these credit repair companies simply vanish because they can’t deliver what they have promised.  The only real way to improve your credit report is with time, effort, and a personal debt repayment plan.

If you decide to work with a credit repair service, there are certain warning signs you should look for to decide if the company is legitimate.  A credit repair service should not want you to pay for credit repair services before any services are provided.  Another warning sign is if a credit repair service recommends that you not contract the credit bureau directly or refuses to answer questions about your legal rights as a debtor.

Some phony credit repair services will advise you to dispute all information in your credit report or take any action that seems illegal, such as creating a new credit identity by applying for an Employer Identification Number to use instead of your Social Security Number.  If you follow illegal advice and commit fraud, you may be subject to prosecution.  It's a federal crime to make false statements on a loan or credit application, to misrepresent your Social Security Number, or to obtain an Employer Identification Number from the IRS under false pretenses.

Negative information on your credit report is generally reported for seven years.  Bankruptcy information can be reported for ten years.  Default information regarding US government insured or guaranteed student loans can be reported for seven years.

While no one can legally remove accurate and timely negative information from a credit report, the good news is that the law does allow you to request a reinvestigation of information in your file that you dispute as inaccurate or incomplete.  According to the Fair Credit Reporting Act, you can dispute mistakes or outdated items for free.  Ask the credit reporting agency for a dispute form or submit your dispute in writing.  Include supporting documentation, clearly identify each item in your report that you dispute, explain why you dispute the information, and request a reinvestigation.  Make sure you remember to keep a copy of the dispute for your records.  If the new investigation reveals an error, ask that a corrected version of the report be sent to anyone who received your report within the past six months. If the reinvestigation does not resolve your dispute, have the credit bureau include your version of the dispute in future reports. 

Many states have laws regulating credit repair companies.  If you believe you have been cheated by a fraudulent credit repair service, don’t hesitate to report the company to your local consumer affairs office or your state attorney general.