Avoid Credit Repair Scams

What to look for to keep yourself from being victimized and how to identify a legitimate credit repair company

The appeal of claims such as "Clean credit in 30 days! Guaranteed!" or "Plagued by poor credit? Our new credit package lets you start over with a clean slate!" can be very strong for people who financially hampered by a poor credit history. These claims lead may people down very dangerous (often illegal) road every year.

If you've got a not-so-great credit record, things could get a lot worse for you if you end up falling for a credit repair scam.

Any one organization that promotes such claims is usually advocating an illegal method of getting credit. This usually involves getting the Credit Reporting Agencies to start a "new" file on you using a new identity. This "new identity" is typically gained through a fresh IRS Taxpayer Identification Number (or a stolen or deceased person's Social Security Number) which is then used to apply for new credit.

Illegal!!! These programs will charge the desperate customer anywhere from hundreds to thousands of dollars and the penalty for such activities can be severe. Using a Federal Taxpayer Identification Number for such activities is a felony and can result in fines, probation and jail time.

So when you hear such claims as mentioned above, consider them to be warning signs of credit repair scam!

A tip worth remembering

Any honest and sincere attempt to repair one's credit report will involve a diligent, consistent and often time-consuming effort, whether done by a do-it-yourselfer or an experienced attorney. It will never involve misrepresentations about one's identity or outright illegal activites.

Now that we've identified the outright illegal outfits, let's look at the aspects of the legitimate credit repair companies. (Yes there is such a thing!)

Can credit repair company guarantee results?

The short answer is no. Never. Any credit repair operation that says it can guarantee results is one to be avoided. It's kind of like an attorney guaranteeing his client that he will win the court case. It can never happen in the courtroom and it can't happen in the credit repair business. However, a good credit repair company might offer some sort of refund if it doesn't achieve the results it was expecting.

Attributes of a good credit repair company

While there are many outright frauds in the credit repair business, take heart, there are also reputable companies that are completely ethical and use the dispute process to defend you against negative entries on your report that you find to be incorrect. These companies will use the rights that the law affords the consumer through federal legislation like the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, and the Fair Credit Billing Act. Through the use of these acts, an experienced and legitimate credit repair company can achieve results that will significantly improve your credit score.

A good credit repair company will:

Use the legal dispute process resulting in negative items being dropped from credit reports (whether the items are accurate or not)

Educate you as to what to expect and give you details of the repair process

Offer detailed personalized service. This includes 24 hour access to support personnel.

Give regular updates as to progress

Each credit repair company must also comply with the The Credit Repair Organizations Act.

The law states that credit repair organizations must give you a copy of the "Consumer Credit File Rights Under State and Federal Law" before you sign a contract. They also must give you a written contract that spells out your rights and obligations. Read these documents before signing the contract.

The law contains specific protections for you.

For example, a credit repair company cannot:

make false claims about their services;

charge you until they have completed the promised services; or

perform any services until they have your signature on a written contract and have completed a three-day waiting period. During this time, you can cancel the contract without paying any fees.

Your contract must specify:

the payment terms for services, including their total cost;

a detailed description of the services to be performed;

how long it will take to achieve the results;

any guarantees they offer; and

the company's name and business address.

What to do if you've been a victim of a credit repair scam

Many states have laws regulating credit repair companies. State law enforcement officials may be helpful if youve lost money to credit repair scams.

If youve had a problem with a credit repair company, dont be embarrassed to report it. While you may fear that contacting the government will only make your problems worse, remember that laws are in place to protect you. Contact your local consumer affairs office or your state Attorney General (AGs). Many AGs have toll-free consumer hotlines. Check the Blue Pages of your telephone directory for the phone number or check www.naag.org for a list of state Attorneys General.

The most important thing to remember is that repairing your credit is a long-term process and there are no easy fixes. Also remember that there are legitimate, reputable and effective credit repair companies out there that can help you.

Many of these successful companies have track records of deleting thousands of negative credit report entries each month.

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