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How to Recognize a Credit Repair Scam

January 12th, 2012

How to Recognize a Credit Repair Scam

Driving down the road, an ad on the radio lets you know that you don’t have to live with bad credit. The ad states, “We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!” The announcer says you can erase your bad credit information, or that you can create a new credit identity, “legally.”

Most often, these advertisements are related to some sort of scam, according to the Federal Trade Commission (FTC). The FTC states that consumers should protect themselves from such fraudulent companies and take advantage of the annual free credit report to monitor and manage their own credit reports.

The fact is that no accurate negative information can legally be removed from someone’s credit report. Only false information can legally be disputed and removed from a file. Sometimes mistakes occur. Other times false information can result from identity theft.

There are certain signs that can alert you to a credit repair scam:

1) The company does not tell you, up front, what you can do for yourself for free and what your rights are. Credit repair companies are to give you this information before you sign up for anything.

2) The company tells you that you should not contact any of the credit bureaus directly.

3) The company wants you to pay up front before any services are provided. This is illegal under the Credit Repair Organizations Act.

4) The company recommends you dispute every negative item on your credit, whether it is accurate or not.

5) The company lets you know they can erase even accurate negative information from your report. Legally, and factually, only information proven false can be removed.

6) The company recommends that you apply for an Employer Identification Number, so you can use that for a credit identity in lieu of your social security number.

Watching for these signs can help you avoid being scammed. Additionally, it is important to keep in mind that if you choose to participate in any of these activities that you know to be illegal, such as fraudulent use of the Employer Identification Number, you can be prosecuted by law along with the company you signed up with.

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