March 1st, 2013

How to Spot and Avoid Credit Repair Scams

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how to spot and avoid credit repair scams

As mentioned in an earlier blog post, next week is National Consumer Protection Week, a campaign that encourages consumers to take advantage of their rights and make better-informed decisions. In the spirit of NCPW, we here at the Credit Karma Blog will be writing a series of blog posts with handy tips on how you can protect yourself.

A few days ago, we covered several ways to keep your money safe. Today, we’re going to show you how to spot and avoid credit repair scams, which are unfortunately more prevalent than we’d like.

First off, let’s cover the basics.

What is a Credit Repair Scam?

Credit repair scams are programs that prey on those who are desperate for better credit by offering to fix and wipe credit reports clean of negative marks. They often do so by promising a “new credit identity”. However, beware of these scams. There is never a “quick fix” for repairing your credit.

Choosing credit repair assistance that turns out to be a scam will only worsen your financial situation. It’ll cost you money you don’t have, it’ll waste your time, and it won’t fix your credit.

How Can I Spot a Credit Repair Scam?

Credit repair scams are usually pretty easy to spot, once you know what to look for. Watch out for any of these red flags:

  1. They promise to remove all negative marks from your credit report. No one can legally remove accurate information from your credit report, even if a credit repair agency claims that you (or they) can. Accurate negative remarks will fall off your report after seven to ten years, but you can’t do anything to speed up the process.
  2. They insist to be paid before the services have been performed. The Credit Repair Organizations Act states that a credit repair company cannot ask you for payment until they’ve fulfilled their promise of service. Never give a credit repair service your money until they’ve accomplished what they’ve promised to do.
  3. They solicit you through email. Many unsolicited emails (whether they have to do with credit repair services or not) are fraudulent, so don’t take your chances. Just throw them away or mark them as spam.
  4. They tell you to create a new identity by applying for credit using a number other than your Social Security Number. Some organizations suggest doing this so you can create a new, clean credit file. However, this is not only illegal, but also impossible.
  5. They tell you not to contact any of the credit bureaus directly. You are entitled to receive copies of your credit report and are also entitled to dispute any errors yourself. Beware of anyone who tells you otherwise.
  6. They give you a vague contract to sign. Before you sign any contracts, read through the terms and conditions thoroughly and make sure the contract contains detailed information, like the name and business address of the organization, the amount you are being charged, the date by which the services will be performed, and how to cancel the contract. If it doesn’t contain that information, or if they ask you to sign a contract before giving you a copy to review, run far, far away!

How can I Avoid a Credit Repair Scam?

Simply put, the best way to avoid credit repair scams is to improve your credit health yourself. There is legally nothing a credit repair company can do to improve your credit that you can’t do yourself.

When investigating your credit yourself, make sure you know your rights.

You are entitled to receive one free credit report every 12 months from each of the three major credit bureaus: Equifax, Experian, and TransUnion. Take advantage of this ability and pull your reports from AnnualCreditReport.com, the only government-approved site to get your reports for free.

In addition, you’re entitled to a report in the following situations:

  • If a company denies your application for credit, insurance, a loan, or employment. Contact the credit bureau that provided your report to the company within 60 days of receiving notice of the action.
  • 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.

Once you’ve received your reports, review them carefully and dispute any errors.

Bottom Line: Not all credit repair agencies are scams, but be sure to do your research with the BBB, FTC, and your state attorney general before using a company’s credit repair services. Or, to be even safer, try repairing your credit yourself.

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.

Want more information? Check out the NCPW Consumer Topics. And stay tuned to the Credit Karma Blog for more on how to protect yourself.

Jenna

helps manage the social media channels and blog at Credit Karma. Although her specialty lies in creating witty post-it notes, she also enjoys sharing all the financial information she’s learned since joining Credit Karma in February 2012. When she’s not working, you can probably find her trying out a new dessert recipe or learning/perfecting any musical instrument she can get her hands on. She may or may not have created a Twitter specifically to put in this byline. Say “hi” @leejennaa!

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16 Comments

  1. Thanks for awaring article. If you have basic information of the laws and rule governing the credit repair industry is an excellent step towards keep away from a credit repair scam.

    Devna Sulivan at 4:31 am on March 2, 2013
  2. Thank you for listing ways to identify credit repair scams. It is so wrong for people to be scamming anyone, but particularly those people who are already vulnerable due to their credit problems. As you said knowing your legal rights and working on repairing your credit report yourself are definitely ways to avoid being taken advantage of. I wonder how to know if a credit repair specialist is above board?

    Bob Gold at 4:56 pm on March 2, 2013
  3. Great article! I often have folks ask me to identify scams for me. In future, I’ll just point them to this article.

    Josh @ Live Well Simply at 5:20 pm on March 2, 2013
  4. Very good information. There are legalities that good credit restoration companies can help with so you don’t waste your time.
    Most important make sure they are a registered CSO.
    Also, don’t necessarily trust BBB ratings. In many states the only way for a credit restoration company to get a good rating is to pay for it. They could be horrible and have a good rating.

    jeff h at 8:10 pm on March 3, 2013
  5. yes i was took by (PCfixSPEED.COM) OF $249.95.IT WAS ONLY TO BE $9.95 (AND THAT WAS ALL THEY WERE TO TAKE OUT. BUT I GUESS THAY JUST HAD TO HAVE MORE. AND MIND U THIS WAS OVER THE WEEKEND.BUT I CALLED THAT SAME DAY WHEN ISEEN THE REAL AMOUNT. COME MONDAY MORN. I CALLED MY BANK ANDDD THESE PEOPLE IF THATS WHAT U WANT TO CALL IT. TOOK ($249.95) OUT. & SO FAR I HAVENT GOT IT BACK YET. BUT THEY ALL WAYS SAY (GIVE US 5 TO 10 DAYS & HAVE NOT SEEN NO MONEY YET.

    Betty Brewer at 6:36 pm on March 13, 2013
  6. I visited creditpreparation.com. The guy actually worked in the dispute department for one of the bureaus and gives inside steps on how to dispute and clean up your credit free of charge. Great information. It saved me so much time and money.

    Joe Doughtry at 12:03 pm on May 26, 2013
  7. I hope more consumers take time out to explore more consumer protection laws on the the state and federal levels. It’s very important as a consumer to know some of these things. Nice Article!

    Andre Vaughn at 6:36 pm on June 28, 2013
  8. In the issue of repairing your credit, it is best to
    do it yourself. Most often, you may hear or see
    advertisements claiming outstanding credit repair
    services offering you “legal” and “guaranteed”
    solutions for your credit problems. These services may
    use mottos that are quite enticing to those who are in
    dire need of credit repair. There are even others who
    get easily convinced after reading “authentic”
    testimonials from several customers, who might not
    actually exist.

    Tit at 9:45 am on August 28, 2013
  9. Yo necesito reparar mi credito mucho de lo q an dicho me a pasado pero no e caído el ultimo fue Legal Credid y se ohia y parecían honestos salen por tele pero creo piden demaciado ustedes hablan de ciertos años pero yo llevo mas de dies años y mi credito la puntuación no suve y es q las compañías de credito no actualisan tu estatua y por eso es espero me oriente q agosto si escribo cartas o q yo no tengo nada grave es sencillo y algunas no fue mi culpa pero no revisan necesito credito ya cojo Ss aun q soy joven quiero una tarjeta de crédito por lo men un balance de1000 o 500 ayuda.

    Orlando Rosado at 7:46 pm on September 13, 2013
  10. Jenna
    Jenna at 8:29 am on September 16, 2013
  11. As a mortgage loan officer, I’m seeing more and more people with less than perfect credit. In fact in my field credit score matters a lot. I know some legal and effective companies that can really help and work effectively. Call (877) 853-5483 and see for your self.

    Bob Hander at 4:46 pm on October 11, 2013

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