Credit Repair Scams: Everything You Need to Know
If your credit score isn’t where you want it to be, it’s normal to go looking for ways to boost your score fast. Unfortunately, consumers looking to repair their credit may be vulnerable to predatory credit repair scams. While there are legitimate and trustworthy credit repair companies, there are also companies that want to take advantage of consumers in order to make a profit.
Not only can credit repair scams be a waste of money, they can also leave you worse off financially than when you started and make you more vulnerable to other negative consequences such as identity theft.
There are a few key signs you should look out for in order to avoid falling victim to a credit repair scam, especially if you’re already in need of credit repair. These include companies who promise guaranteed results, require an up-front payment, or offer few or no explanations of how they go about repairing your credit.
Reputable companies generally don’t guarantee that the credit repair process will work a hundred percent of the time, and typically require consumers to sign a contract that clearly outlines the terms of the agreement. If you watch out for these telltale signs, you’ll be well on your way toward avoiding predatory scams and improving your credit.
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Signs of a Credit Repair Scam
Becoming educated about scams is the best way to avoid them. Once you know what to look for, most credit repair scams are relatively easy to spot. Credit repair scams may have one or more of the following characteristics:
Any credit repair company that guarantees results is likely to be a scam. Reputable companies don’t guarantee results, since some aspects of the credit repair process are outside their control.
In particular, any company that makes guarantees about their ability to remove accurate but negative information from your credit report is likely a scam. Instead, reputable companies may promise to undertake certain steps to help you repair your credit, without any hard guarantees about the final result.
If a credit repair company demands an up-front payment, this is another sign of a scam. Credit repair companies are actually prohibited from charging up-front fees by law, and must wait to charge a fee until after they’ve performed credit repair services.
While some legitimate credit repair companies may mistakenly charge a fee before services are rendered, up-front fees are almost always a sign that the credit repair company is a scam.
Credit repair scams are often vague on the details, promising a quick fix for your credit score without any concrete explanations about how they plan to improve your credit.
Reputable companies provide detailed explanations of the credit repair process to consumers, including ways that consumers can potentially boost their scores all on their own. Credit repair companies should also clearly lay out what the credit repair process looks like, along with any applicable fees, charges, and terms of service.
Some credit repair scams promise to create a “new identity” — complete with a new Social Security number or federal employment identification number — in order to boost your score. This is a sure sign of a scam, as there’s no way to manufacture a “new identity” in order to escape poor credit.
Falsification of Information
Disreputable credit repair companies may claim to be able to falsify information on your credit report, or to remove damaging but accurate information. This is another surefire sign of a scam.
The only way to get negative but accurate marks off your credit report is time — negative credit history usually only impacts your score for seven years. While credit repair companies can definitely remove inaccurate information from your report, removing accurate information is definitely a scam tactic.
If a credit repair company doesn’t ask you to sign a contract that lays out the basic terms of your agreement, including a detailed explanation of their services along with any associated fees and costs, this is another sign of a scam.
Credit repair scams may be vague on the details and promise too-good-to-be-true improvements to your score without clearly laying out exactly what they plan to do to improve your credit. Reputable companies will ask you to sign a contract so that all parties are informed and agree to clearly laid-out terms.
Common Credit Repair Scams
There are a few common credit repair scams that predatory companies may try to use. These include credit privacy numbers, file segregation schemes, and tradeline renting.
Credit Privacy Numbers
Credit privacy numbers are numbers that credit repair scams may claim you can use instead of your Social Security number when applying for a loan, credit card, or other product that might be associated with your credit. While credit privacy numbers may sound like a great idea, they don’t actually exist — they’re a scam that preys on consumers with poor credit trying to raise their score. In addition, it’s actually illegal to use a number other than your Social Security number on a credit application.
File Segregation Schemes
File segregation schemes are another common tactic for credit repair scams. Credit repair companies may claim to be able to create a new consumer credit file by applying for an employer identification number. This practice is illegal and could land gullible consumers as well as fraudulent credit repair companies in trouble with the law.
Tradeline renting refers to the process of adding another line of credit to your credit report, and is similar to the process of becoming an authorized user on another person’s credit card. Unlike becoming an authorized user, however, tradeline renting is done by a third party for a high fee, and is often viewed as disreputable or even fraudulent by banks and other lenders.
What to Do If You Are Scammed
The best way to deal with credit repair scams is to avoid them in the first place. If you’ve already fallen prey to a scam, however, there are a few things you can do. These include reporting the scam, filing a complaint, and considering legal action.
Report the Scam
If you are the victim of a credit repair scam, you should be sure to report the scam to your state attorney general. This can help protect other consumers from falling for predatory scams.
File a Complaint
Consider Legal Action
If you’ve been scammed by a fraudulent credit repair company, you may want to consider taking legal action against this company in order to try to get your money back. Pursuing legal action may also be a way to make sure that others don’t fall victim to the same scam.
Safely Repair Your Credit
After falling for a credit repair scam, odds are that your credit still may be in need of repair at the end of the process. You should take the time to repair your credit safely and legitimately, either on your own or with a reputable credit repair company. There usually aren’t any overnight fixes when it comes to credit repair — the process takes time and effort on your part.
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