If anyone says they can “fix” or “repair” your credit, watch your wallet!
So-called “credit repair” services sometimes claim they are able to “clean up” a consumer’s credit report, erase bad marks from a credit history or create a new credit identity. But there’s one problem—it’s illegal to make such claims. No one can legally remove negative information from a credit report if it’s accurate.
Any company that says it can repair your credit probably is trying to take advantage of you. Credit repair companies can’t do anything for you that you can’t do yourself.
How to Recognize a Credit Repair Scam
Fortunately, there are several ways you can spot credit repair rip-offs:
- They often charge high fees, between $250 and $5,000 up front.
- They typically say that they can offer you a quick fix for your credit problems.
- They use high-pressure sales tactics.
- They claim to be affiliated in some way with the federal government or some government agency.
- They promise to remove evidence of a previous bankruptcy and records of late payments from your credit report.
- They make sensational claims that sound too good to be true.
- They claim that they know loopholes in the law to fix your credit. For example, they claim that if you dispute an item on your report in writing and the creditor does not respond within 30 days, the item must be removed. However, even after the item is removed, the credit bureau can continue to investigate the item and it will go right back onto your credit report if proven valid. Meanwhile, you paid a scam artist to have it “removed.”
Credit repair scams were so prevalent that federal legislation called the Credit Repair Organizations Act of 1996 was passed, which states that:
- A credit repair company must give you a written statement detailing the services it will provide and total cost of those services.
- You can cancel a credit repair contract for any reason within three business days of signing.
- A credit repair company is not allowed to take money from you until all of the services in the contract have been provided.
- A credit repair company must not encourage you to alter your identity for credit purposes.
- A credit repair company must not make any misleading statements or engage in deceptive practices.
In spite of the Credit Repair Organizations Act, some companies remain in business. One technique they use is known as “file segregation.” Here, the company suggests you get an Employee Identification Number (EIN), also known as a federal tax identification number. These numbers are commonly used to identify business entities. The credit repair company then suggests you use the EIN to apply for credit, so your personal credit report will not be accessed in the application review process. While any person who starts a business may apply for an EIN, it is illegal to do so with the intent to defraud. Don’t put yourself at risk.
So stay away from anyone who says they can “repair” your credit. The real way to clean up your credit is to check your credit reports regularly to find errors or discrepancies you can correct. And the best way to stay clean is to pay all your bills on time and avoid excessive debt.
For more information visit: www. InCharge.org.
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