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A company may be a credit repair scam if they guarantee results, ask you to lie on applications, demand up-front payments and don’t explain your legal rights.
Credit repair services are meant to help people review and fix their credit and learn healthy credit habits. Unfortunately, the credit repair industry is full of scams that take advantage of consumers’ money and information.
Below, we’ll help you spot the warning signs of a credit repair scam. Not all credit repair agencies are problematic, so we‘ll also help you understand how to find a quality credit repair service and get the help you need.
A credit repair scam is a company that sells you a false promise to erase your bad credit. In reality, these companies take your money, don’t help improve your credit and then disappear, leaving you to pick up the pieces.
It’s important to note that not all credit repair companies are scams. Companies must follow industry regulations put forth by the Credit Repair Organizations Act (CROA).
The CROA is a federal law that protects consumers by defining what agencies can and can’t legally do when providing credit repair services. Companies that do not follow the CROA regulations are considered an illegitimate business.
If a company offers you a too-good-to-be-true promise about fixing your credit scIf a company offers you a too-good-to-be-true promise about fixing your credit score, it’s likely exactly that—too good to be true. Improving your credit won’t happen overnight. Instead, building up your credit will require time and a commitment to healthy credit habits.
There are some common—and clear—warning signs of credit repair scams you should watch out for.
It’s illegal for a credit repair company to tell you they can guarantee repair results.
Ultimately, no company can promise this because these companies have no control over your credit. Instead, your credit is determined by private companies called credit bureaus that collect information from banks, mortgage companies and other creditors.
Sometimes, a credit repair scam will go so far as to promise you a “new credit identity.” This illegal approach can get both you and the agency in trouble.
Watch out for:
Under the CROA, credit repair companies are required to give you a written contract that spells out the services it will perform, what you’ll pay and how long it will take to get results. Be sure to ask for a contract and read it carefully before signing.
All agencies must make it clear to you that you can perform the offered services yourself. Under the Fair Credit Reporting Act (FCRA), consumers can access their own credit reports, review them and file disputes.
You don’t technically need a credit repair agency for these steps—although they can take some of the burden off of your shoulders. Another critical legal right is that you can cancel a credit repair contract with a credit repair company within three days of signing, for any reason.
Knowing your legal rights helps you understand what you’re getting into, what you’re paying for and what you can expect.
If you’re about to sign with a credit repair agency and at no point do they go over your legal rights, this is a clear sign to walk out the door.
Watch out for:
Credit repair agencies shouldn’t be discouraging you from contacting credit reporting agencies. Their concern here is that you may try to do the work yourself, be successful and not have to pay them for their services.
A good credit repair agency won’t have an issue with you trying to learn and fix the problem yourself because they genuinely want your credit to improve—regardless of who fixes the problem.
Watch out for:
Credit repair scams might also ask you to dispute all of the information in your report—even if the information is correct.
The angle here is that the scammy company wants you to overwhelm the credit bureaus with false disputes in the hopes that the bureaus will be too buried in paperwork to investigate the dispute in depth.
While this tactic is not illegal, consumers rarely win when disputing accurate information.
You should, however, dispute inaccurate information that shows up within your report or dispute negative information that came from identity theft.
Watch out for:
If you run across a credit repair company that shows any of the warning signs mentioned above, you should probably avoid that company altogether.
When considering credit repair companies, you can verify their legitimacy by:
When searching for a reputable credit repair company, keep in mind the business practices that are prohibited by the CROA.
Credit repair companies cannot:
There are a number of tactics companies use to carry out credit repair scams. Here are some of the most common.
If you become the victim of a credit repair scam, begin repairing the damage as soon as you can. You can follow the steps below to begin reporting the scam to the authorities.
The right credit repair company can help you in two ways: by being with you every step of the way and by offering its expertise.
Unfortunately, there are companies out there that are looking to take advantage of your money and your identity for their illegal schemes.
On the bright side, there are also companies whose sole mission is to help you rebuild your credit and reach the money milestones you dream about.
CreditRepair.com is a reputable agency with over a decade of years of experience. Our team can help you review and dispute items on your credit report so your credit profile is an accurate representation of your financial history.
If you’re ready to get the professional assistance you deserve—reach out to us today.
Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.
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