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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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 improve your credit health 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.

Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.

18 Comments

  1. I contested some items on my Trans Union report and I just got the results back. They were able to delete 18, yes 18 inaccurate negative items on my report. my score is still low , but it is a start up a long hll. So in the past 2 months, my score has improved 23 points. That makes me happy and gives me hope that I can get my score back to the 700′s where it was a while ago.

    JTM at 6:03 am on April 26, 2011
  2. That’s great! Good for you for getting your credit straight. Best of luck as you continue to monitor your credit health.

    bethy at 4:24 pm on April 26, 2011
  3. Thank you for educating us how what to avoid when it comes to credit repair solicitations. I hope that more people read this and understand how easy it is to protect yourself from scams.

    Greg at 2:02 pm on April 27, 2011
  4. Such an informative piece you got here. There are really a lot of things that we need to avoid, especially when it comes to credit. We can only have two choices to make or to choose, go for a “do-it-yourself” credit repair or go for a reliable credit company.But, one thing we need to be sure about is to know our capacity and our knowledge before deciding on which to go for.This way, we get to protect ourselves as well from many illegal conducts.

    Julie Jacobs at 2:53 am on December 9, 2011
  5. Anyone who is DIY to remove negative items on their credit report and improve their credit score go to this website for more information on how to go about it correctly, http://www.planetloan.com and click on the Financial Library tab at the bottom. This is a free and clean website setup to help those who need help. Good luck!

    Mpho at 10:00 am on November 7, 2012
  6. I tried for years to fix my credit. I ran into a lot of scams. Thats why I usually suggest Lexington Law to people. They helped me out a ton. They are a real law firm with a great reputation. You can know you are safe using them, and you can expect results.

    Pat at 12:13 pm on December 26, 2012
  7. I am using Lxington law firm for 6 months.I am really thinking is this a scam or are they what people say they are. They did get some things off my credit report but how much longer is this going to take them Geeze I could of put this money to the bills. What I got from them so far is to go buy things on time like Arrons and they do report.I used Rent A Center got things on time there so I get postive here they don’t report to them. Ashley’s does report after the item is paid off.Some car lots do the same Buy here pay here.

    Debbie at 10:45 pm on February 5, 2013
  8. Hello there, You have done a great job. I will definitely digg it and personally
    recommend to my friends. I’m confident they will be benefited from this website.

    mortgages for Bad credit rating at 5:21 am on February 8, 2013
  9. I dont understand this article is contradicting it says no credit repair company can repair your credit that its not possible then it goes on to say never pay a credit repair company up front and refers lexington law firm…. but they required an up front payment from me so I pray I am not part of a scam. :(

    Amber at 11:38 am on March 8, 2013
  10. I kinda disagree with this article. The credit repair agency i’m currently using has increased my credit score by 85 points in 45 days by contesting 7 negative items on my report. They were subsequently removed from all 3 bureaus. So… this article is not true and sounds to me like it’s written by someone at TransUnion.

    Matt at 6:04 pm on March 8, 2013
  11. How do I clear my bad credit myself without the extra costs of the actual credit cleaners peoples??

    JOSEPH FERRANTE at 6:12 pm on August 18, 2013
  12. Jenna
    Jenna at 7:25 am on August 19, 2013
  13. I have seriously monitored my credit through creditkarma and followed the advise offered as best I can.. my score has jumped 12pts in six months. I am working hard at turning my bad credit to good…

    dian black at 2:29 pm on September 18, 2013
  14. Jenna

    Nice! Keep up the great work!

    Jenna at 7:38 am on September 19, 2013

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