How to Identify Credit Repair Scams
The world has changed so much since the introduction of the internet. Free access to endless information, millions of new specialty jobs, and countless hours of entertainment. However, the internet also gave us a whole new world of scams.
Prior to the internet, door-to-door salespeople and scamming phone callers were the biggest threat to your wallet. Now, there’s a threat around every virtual turn on the internet. How are you supposed to keep up and know what is real and what is a threat?
In the world of credit repair, scams can be especially detrimental. They will promise instant fixes or fast turnarounds, but the truth is they are only taking your money and leaving you with nothing to show for it. When you need the help rebuilding your credit, how are you supposed to tell the real-deal from the fakers? What are some of the biggest red flags to avoid? This introduction to credit repair scammers will help you determine with services to avoid and which services are worth your dime.
Warnings and Red Flags
When you’re first starting out your search for a credit repair company, you might not know where to begin. Do you simply search for local repair services on Google? To start, you should know the red flags and glaring warning signs of a credit repair scammer. Luckily, the Consumer Financial Protection Bureau (CFPB) of the US Government has put together a handy list of the most common fraud alerts:
- #1 Red Flag: They ask you to pay up front before doing any work. This rule could be applied to almost any service or product: if they ask you to pay before they do the work, they’re probably scamming you. Additionally, as the CFPB notes, certain laws were created to protect consumers from these sorts of scams: “Under the federal Credit Repair Organizations Act, credit repair companies can’t request or receive payment until they’ve completed the services they’ve promised. Some companies will structure monthly payment plans to try to avoid this requirement. You should know that all forms of upfront payment before services are completed are illegal.”
- #2 Red Flag: They promise to remove negative items from your credit history (even when the items are accurate and current). As much as we would all like that to be true, no service can legally remove negative items from your credit unless they are inaccurate. If you’ve made some mistakes in the past, you have to live with it. Any company that falsely advertises this service is an obvious scam.
- #3 Red Flag: They refuse or avoid explaining your rights as a creditor and client. Repairing your credit is actually something you can do all by yourself in most circumstances, but many people seek out professional help to make the process faster or easier for them. Genuine credit repair services will let you know what you legally can do for free, and will help with the rest. Scammers will avoid filling you in on what you can do for free, and will instead charge you for those free services. Additionally, as a protection for customers that seek out these service, you have to right to cancel any contracts made with a credit repair service within three days of signing up. These cancellations should be completely free, and they cannot legally demand money from you.
- #4 Red Flag: They tell you not to contact any of the credit reporting agencies. You have the right to speak directly with any of the nationally recognized credit bureaus, and anyone that tells you otherwise is trying to scam you.
- #5 Red Flag: They request you to dispute all the information in your credit report, even if it is accurate and current. Again, anyone that asks you to dispute accurate information (as much as we would like it to disappear) is trying to pull one over on you. You cannot dispute or erase current and accurate credit history or information.
Outside of these common red flags, credit repair scammers might use such phrases as “new credit identity” or “a fresh start to your credit score.” Since credit scores are based on your history with the banks, there is no legal way they can create a new credit identity for you: it will always follow you throughout your life. If they try to sell you a new “nine-digit identity,” then it is possible they are even trying to involve you in a case of identity theft, according to the Federal Trade Commission (FTC).
Don’t let the scammers win, and be smart about who you contract to repair your credit.
Trust is Money
In the world of credit repair, you have to be able to trust the people you are working alongside. Luckily, once you know what red flags to look out for, you can do a better job of telling the fakers from the real services that can help you.
Not all credit repair services will be worth your penny, but if you’re in the market for some assistance, be sure to find a service that promotes working alongside you in your credit journey. They can help you contact the right people, dispute the inaccurate claims in a timely manner, and work on building better habits for your future.
Credit repair cannot be done in 30 days or with a one-time phone call: it takes time, adjusting your lifestyle, and building up a more positive history with the banks. Qualified credit repair services will be able to help you do just that.
Looking for more information on credit scores? Visit the Fiscal Tiger credit score resource and learning center for more tips and guides. If you want to dispute errors yourself, visit our dispute letter template resource center for templates and writing tips.
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Katie McBeth is a researcher and writer out of Boise, ID, with experience in marketing for small businesses and management. Her favorite subject of study is millennials, and she has been featured on Fortune Magazine and the Quiet Revolution. She researches SEO strategies during the day, and freelances at night. You can follow her writing adventures on Instagram or Twitter: @ktmcbeth
This post was updated May 5, 2018. It was originally published July 28, 2017.