A Complete Guide to Credit Repair Scams

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(Newswire.net — May 13, 2020) — Knowing that the likelihood of loan or credit card application approval is very low, people with low credit scores often look for credit repair services providers. Many of them are not aware of the common scams. There are some individuals and even companies that can take advantage of unsuspecting and vulnerable people looking for help from experts.

There are many legitimate companies genuinely helping people in increasing their credit score and giving advice on debt management, debt settlement and other ways to go debt-free. However, you have to stay away from companies and individuals that are after your money and personal details to misuse for identity theft. To keep your money and information safe, we have put together a complete guide to common scams, signs of scams, steps to take when you are scammed and repairing credit score safely.

Signs Of Credit Repair Scam

Many credit repair companies claim to offer magical solutions that can fix the problem within a short span of time. They make promises that they are not allowed to make. It is illegal to make false claims. If you find a company promising a solution that is too good to be true, you must report that company. The following are the signs of a company that might take advantage of your bad financial situation.

Guaranteed Results

The Credit Repair Organizations Act (CROA) protects the rights of a consumer. This law outlines guidelines for credit repair companies. According to the CROA, a credit repair company cannot guarantee results. No company can make the following false promises:

  • Results in a fixed time period
  • Improvement to your credit score
  • Removal of all accurate negative items

Upfront Payment

According to the Credit Repair Organizations Act, a credit repair company cannot ask for payments before it renders services. Scammers are aware of the fact that many consumers don’t know their rights. They ask for a large upfront payment and promise quick results. Avoid working with such companies if you want to avoid credit repair scams.

Illegitimate credit repair companies don’t allow cancellation of services unless the consumer pays a fee. This law gives you the right to cancel credit repair services within three days. You don’t have to pay any penalty for the cancellation.

New Identity

Your credit score is low because there is a lot of negative information on your credit report. Though you can remove negative information due to errors, legitimate negative pieces of information are there to stay for certain specific periods of time. A scammer promises to remove legitimate negative information. Legally, this is not possible. The scammer might promise a new identity. He promises to use a new Credit Privacy Number or Employer Identification Number instead of the Social Security Number to create a new identity.

Don’t Explain Your Legal Rights

The credit repair company must explain the legal rights you get under the Credit Repair Organizations Act. However, unethical companies and scammers don’t do that. Here is what they do:

  • They tell consumers not to contact any of the credit bureaus.
  • They don’t offer a copy of the contract. You need this copy to review the contract before you sign it.
  • Credit repair companies take some steps to improve your credit score. You can take some of these steps on your own. A scammer never tells how this self-help works.
  • They don’t include important information in the contract. You must make sure that the amount you will pay, date and other important pieces of information are in the contract.

If the company is not answering your questions or you feel that the company is trying to hide something, stay away and save you from credit repair scams.

Misrepresents Information

Your credit report must reflect legitimate information. Your name, SSN and other personal and financial details must be accurate. However, a scammer might ask you to misrepresent some of your details. The company might ask you to use CPN or EIN in the place of SSN.

Common Credit Score Repair Scams

Illegitimate credit repair companies promise guaranteed results, which is illegal. It is important to learn about credit repair scams and how do they work. You need to know what is legal and what is illegal. The following are the common credit repair scams.

File Segregation Schemes

A file segregation scheme is a scheme in which an individual or a company offers to use an Employee Identification Number instead of your Social Security Number to apply for a credit card. It is an illegal act both for the company and the consumer.

Credit Privacy Number

Like an Employee Identification Number, Credit Privacy Number is also a creation by scammers. It is used in the place of consumer’s Social Security Number to apply for credit. You can say that Credit Privacy Identification is a fake Social Security Number. This number is created using the identity of some other consumer. This is an illegal act known as identity theft.

Tradeline Renting

In tradeline renting, you pay for authorized user status. This tradeline appears on your credit report. As a result, your credit score is improved. However, this move does not remove any negative information from your credit report. Tradeline renting boosts your credit by adding positive information to the report.

Even when it is not necessarily illegal, there is a risk of getting into trouble. Your friend or a family member can add you as an authorized user. However, don’t “rent” a tradeline from a stranger. It might be a credit repair scam.

What To Do When You Are Scammed

Can you fix your credit scams when you are victim to credit repair services scam? Take the following steps if you are scammed:

  • File a complaint with the Better Business Bureau and the Federal state attorney general.
  • Report the individual or organization to the state attorney general.
  • Consult with an attorney to take legal action.

How To Repair Credit Score Safely

Hire a legitimate credit repair company or repair your credit score on your own. Let one of your friends, co-workers or family members recommend a credit repair company. Don’t forget to check online ratings and reviews of the company.