April 22nd, 2011
DIY Credit Repair: How to Spot a Credit Repair Scam
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The Credit Repair Organizations Act, or CROA, has protected consumers against unfair business practices by fraudulent credit repair organizations since 1996. However, some consumers still fall prey to advertising scams that promise to fix credit and wipe credit reports clean of negative marks.
But when it comes to repairing your credit, there’s never a quick fix. Credit repair, whether you do it yourself or you enlist the aid of a credit counselor, can take a long time and a lot of patience. When eliciting help from a credit repair service, make sure you choose a reputable company by watching for these credit repair red flags.
- They solicit you through email. If you receive unsolicited emails from credit repair services, don’t even open them. Many unsolicited emails are fraudulent, so don’t take your chances.
- They say they can remove all negative marks from your credit. If the negative information on your credit report is accurate, it’s cannot be removed by you or anyone else. Accurate negative remarks, like bankruptcies or foreclosures, will only fall off of your credit report after seven to ten years. You can’t do anything to speed up the process, and neither can a credit repair company.
- They tell you to create a new identity by applying for an Employer Identification Number. The purpose of them suggesting you do this is so you can create a second, clean credit file, free from negative marks. This is called “file segregation.” Not only is it illegal to attempt to create a second credit file, but it’s also impossible.
- They ask for money before they provide any services. Under the Credit Repair Organizations Act, a credit repair company cannot ask you for payment until they have fulfilled their promise of service. This is a huge red flag. You should never give a credit repair service your money until they’ve accomplished what they’ve promised you.
- They tell you not to contact any of the three major credit bureaus. You have a right to know what’s on your credit report and to dispute any inaccuracies yourself. A credit repair service shouldn’t tell you not to check your credit report.
Do-It-Yourself Credit Help
If you want to avoid credit repair companies all together, we suggest investigating your credit yourself. You have rights as a consumer, especially when it comes to repairing inaccuracies on your credit. Here’s how to exercise your rights:
- You’re entitled to one free credit report from each major credit bureau. Go to annualcreditreport.com to request your credit report.
- You’re entitled to a free copy of your credit report if a company denies your application for credit, a loan, or employment. Contact the credit bureau that provided your report to the company.
- You’re entitled to one free credit report a year if you’re unemployed and plan to seek employment within 60 days, if you’re on welfare, or if your report contains inaccuracies due to fraud such as identity theft. This is in addition to the three per year you’re already entitled to.
- You’re entitled to dispute mistakes or outdated information on your credit report for free. Under the Fair Credit Reporting Act, both the credit bureau and the creditor must correct inaccurate or outdated information on your report. Start by contacting the credit bureau and the creditor for which you have an inaccuracy and dispute the error.
Bottom Line: You can repair your credit yourself in many cases, and there are reputable credit repair counselors who can help you with your financial conundrums. There are also legitimate credit repair companies, such as Lexington Law Firm. If you’ve already been a victim of a fraudulent credit repair service,report the abuse, especially if you’ve lost money due to credit repair fraud. Contact your local consumer affairs office or your state Attorney General to report the abuse.