Protect Yourself from Credit Repair Scams

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The allure is undeniable: credit repair guaranteed to boost your credit score. With better credit, if you apply for a loan or home mortgage, you’ll get a better rate, which could save you thousands of dollars. However, not all credit repair companies are created equal and scams can waste your time and end up costing you major coin.

Be on the Lookout for Credit Report Scams

Before searching for a credit repair agency,remember, there are many ways that you can improve your credit score. It may take some time and effort on your part, but you have all the tools you need to repair your credit. Repairing your credit yourself is free and there are tons of reputable sites on the web, like Credit Sesame, to take you through the process. However, for those who feel more comfortable with a professional credit repair agent, keep in mind these signs of a scam, according to the Federal Trade Commission (FTC):

  • The company requires you to pay before they’ve provided any credit repair services. Reputable companies will not require you to pay until the service is completed.
  • The company does not tell you your legal rights and what you can do for yourself for free.
  • The company does not recommend that you contact the credit reporting bureaus directly.
  • The company suggests you create a new credit identity—and therefore a new set of reports—by applying for an Employer Identification Number (EIN) and use that instead of your Social Security Number. This is fraud and you may be subject to prosecution.
  • The company suggests that you dispute correct information on your report.

Know Your Rights when it comes to Credit Repair

Credit repair companies are subject to the Credit Repair Organizations Act (CROA), which protects consumers against unfair or deceptive advertising claims. Also, they must provide you with a “Consumer Credit File Rights Under State and Federal Law” detailing your rights and obligations.

Among the provisions are specific protections.

  • The company is not allowed to make false claims about services.
  • The company cannot charge you until the promised services are completed.
  • The company cannot perform any services until it has your signature on a written contract and has completed a three-day waiting period, during which you can cancel the contract without penalty.

The contract will also specify upfront what the obligations are for both parties.

  • The payment terms for services, including total cost.
  • A detailed description of the services to be performed.
  • How long it will take to achieve the results.
  • Any guarantees offered.

Already Scammed?

If you’ve already been taken in by a credit repair scam, you have the right to sue under CROA. The fraudulent company may be found liable for damages suffered or the amount paid to them, whichever is greater. If the violation was particularly offensive, then attorney and court fees may be added to the settlement.

The first step is to contact the FTC regarding the sham credit repair organization by filing a complaint on their website or by calling 1-877-FTC-HELP.

Credit repair is possible, but be wary of claims that are too good to be true, and above all, trusting yourself to repair your credit is a first major hurdle to clear on the track back to financial success.

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