News Update: "Consumers need to be more cautious in vetting (credit repair) companies with which they do business." - BBB Study

Detecting A Credit Repair Scam

Posted By:  |  August 26, 2013  |  0 Comment(s)


It’s no secret, credit repair scams exist. These fraudulent companies pretend to be legitimate, make promises, and then disappear with your hard-earned money. Even though there are companies that can help you in your credit repair efforts, it is important to be aware of the “red flags” that signal a service may be a hoax before you pay a dime.

While you can repair your own credit for free, it is tedious work and it can consume much of your time. Choosing to pay for a credit repair service is a good option if you need your credit repaired, but can’t do the work on your own. That being said, you need to make sure that the company you are hiring is not just going to take your money and run.

Promises Too Good To Be True

The first thing you want to be wary of when enlisting the help of a credit repair company are the promises that sound too good to be true. There are credit repair clinics that promise that they can legally remove bankruptcy items from your credit report, even when the law states otherwise. There is nothing a credit repair company can do that you can’t. There is no magic wand credit repair companies wave to get negative items removed from your credit report. If you can’t remove a bankruptcy item from your credit report,  than the credit repair company can’t do it either.

The FTC has reported that credit repair scams are a one of the top consumer complaints, in part due to the “guarantees” and “promises” they use to sell prospective consumers on their service. Check the Fair Credit Reporting Act (FCRA) before making a decision on a specific credit repair company because then you can see exactly what is legal to do in the credit repair industry and what is and what is not legal. If a credit repair company is making service guarantees that do not comply with the FCRA, you want to stay away from them.

CROA Compliance

The Credit Repair Organizations Act was in part designed to manage scams and help consumers make a decision on who to hire for help. CROA details and regulates credit repair practices, including payment. For instance, it is against CROA regulations to charge a “set-up” or “up-front” fee. Credit repair companies that are being compliant with CROA previsions only charge a customer after they have done work on an individual’s case.

Disputes the Indisputable

If there is a negative item on your credit report that is accurate, it cannot be legally removed. Credit repair companies can remove errors or inaccurate items in order to help paint a real picture of a borrower’s potential to pay back a loan. They cannot remove a delinquency item if you really were delinquent in your monthly payments. If a credit repair representative is telling you that they are going to dispute ALL negative items on your credit report, despite accuracy, you may want to be skeptical.

Research is Key

Don’t sign up for anything before you have a solid understanding of the company’s principles. Look at consumer reviews and expert analysis of the specified credit repair company prior to talking to a representative. If your friends have turned to a credit repair company for help, ask them about their experience. There are resources available to you so you don’t have to make this decision without the necessary information.

You don’t want to be the next victim of a credit repair scam. Stay away from companies that make absurd promises, are not CROA compliant, or partake in illegal practices.