How to Avoid “Credit Repair” Scams
A common misunderstanding is that any services that can help you raise your credit score qualify as credit repair. Nevertheless, credit repair firms only assist clients in having unjust or false negative information deleted from their credit reports. A negative entry on your credit report can significantly lower your credit score, therefore it’s critical to find and correct these errors as soon as you can.
Are Typical Credit Repair Scams Examples
After a setback, it might be intimidating to repair your credit history. Unfortunately, this is the reason why some credit repair businesses intentionally confuse and mislead clients to get their business. These people are only trying to get their financial lives back on track.
Over the past few months, more than half of those who filed complaints with the CFPB regarding credit restoration specified “fraud or scam” as the subject of their grievances.
The full range of protections available to them or the regulations governing credit repair businesses is often unknown to the public. The Credit Repair Agencies Act and frequently the Telemarketing Sales Rule, which both prevent credit repair organizations from utilizing deceptive techniques and from receiving upfront fees, are only two of the various federal laws that these businesses are required to abide by.
Legitimate credit repair businesses frequently make claims they can’t keep. Sometimes, the promises they make are against the law. You can become acquainted with and stay away from these organizations’ prevalent frauds by being aware of them. Examples of some of the most typical credit repair scams include the following:
- Systems for separating files
This happens if a business or person offers to provide you with an Employee Identification Number (EIN) to use in place of your Social Security number when you apply for credit. Companies are not allowed to engage in this activity lawfully. Also prohibited is the use of an EIN in place of a Social Security number by consumers.
- Privacy numbers for credit
Credit privacy numbers (CPNs), which individuals can use in place of their Social Security numbers when applying for credit, are also created by scammers. A CPN can be thought of as identity theft because it is essentially a phony Social Security number that is frequently generated using someone else’s identity.
- Renting a Tradeline
This happens when a con artist pays to become an authorized user on a tradeline, which raises your credit score. While a strong tradeline can raise your credit score, it does not alter or eliminate unfavorable information on your credit record. Paying to “rent” a tradeline from a stranger can harm your credit even though it isn’t legally against the law. In some circumstances, the caller can be a con artist looking to swindle you out of money.
- Questions cannot be answered by them
The firm representative is unable to give you detailed details about the services they are providing for you or estimate the entire cost of those services. You can tell if you are dealing with a reliable company by asking a few straightforward questions.
- They request money in advance
The business demands payment before offering any services. The Credit Repair Organizations Act prohibits credit repair businesses from asking for or accepting payment before providing the claimed services. Some businesses will design monthly payment schedules to get around this need, but you should be aware that no upfront payment is permitted. It’s easy to follow the rule, “Don’t pay upfront.” If the business engages in telemarketing so that the Telemarketing Sales Rule is applicable, the business may not ask for or accept payment until it has given you a credit report that was created more than six months after the outcomes were promised and that demonstrates those results.
The Advantages of Hiring a Credit Repair Business
Rebuilding your credit is something you can do on your own. Search through all of your credit reports for errors, however, might take a lot of time. This can be accomplished through a credit repair company. Additionally, the organization will make sure that there are no mistakes or crucial pieces of information missing if you need to file any disputes because they are aware of the information that credit reporting bureaus want.
How Do I Proceed If I’ve been a Victim of a Credit Repair Scam?
If you realize that a credit repair scammer has taken advantage of you, there are several actions you can take, including the following:
- Inform your state’s attorney general about the fraudulent credit repair scams.
- The Federal Trade Commission (FTC) and the Better Business Bureau with complaint (BBB).
- If you want to file a lawsuit against the business or person accountable for the scam, speak with a consumer protection attorney.
- Block incoming phone calls and texts. Take action to ban obtrusive calls and filter obtrusive text messages.
- Abstain from acting as soon as possible. Genuine companies will offer you some space to think before acting. A scammer is someone who makes you feel under pressure to part with money or divulge personal information.
- Talk to a trusted friend or family member now. Tell someone what occurred before moving forward with any other actions. This person could be a friend, a relative, or a neighbor. You can become aware that it’s a fraud if you talk about it.
- Instead, think about establishing credit
Credit building is an alternative to credit repair. Credit building focuses on adding fresh, good information to your credit report as opposed to credit repair, which focuses on removing negative information from your credit record. Building credit promotes responsible financial practices, such as completing monthly payments in whole and on schedule.
Avoid businesses that won’t give you a written contract or explanation for their services. Agreements between the business and you must be in written and signed by you to comply with the federal Credit Repair Organizations Act.
The contract must include the company’s name and precise address, the agreed-upon fee, the scope and details of the services to be provided, as well as the date by which the job will be finished. Additionally, you are permitted to end the contract within three days (not counting Saturdays, Sundays, or holidays).
It takes time and commitment to repair and restore your credit. Reputable credit repair businesses won’t make you promises of quick repairs, suggest lying to others, or avoid answering your queries or addressing your issues. Carefully research these businesses. If you locate a reliable one, pay attention to what its staff recommends. They frequently offer useful advice in addition to representing your interests in front of lenders or credit bureaus.