March 1st, 2013
How to Spot and Avoid Credit Repair Scams
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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:
- 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.
- 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.
- 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.
- 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.
- They tell you not to contact any of the credit bureaus directly. 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 and pull your TransUnion credit report from Credit Karma and your other two reports from AnnualCreditReport.com.
- 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 Lee 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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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.