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Credit Repair Scams

How to Avoid Credit Repair Scams

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Credit Repair Scams
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If you have a credit score that is less than perfect, it could prevent you from securing a loan or even from getting a job. There are steps to repair your credit score on your own at no cost.

However, there are many organizations that promise to do the work for you. It is easy to fall for scams which promise a fresh start or a repair service. You will need to perform due diligence in order to ensure the company is legitimate, or you may end up getting scammed. Improving your credit score does not happen overnight, so be cautious about companies that promise a quick fix.

Signs of a Credit Repair Scam

The Federal Trade Commission (FTC) suggests that there are a few key elements that make a company stand out as potentially fraudulent:

The company asks you to pay for repair services before any work has been done. Under the Credit Repair Organizations Act (CROA), these companies can only charge you after they have completed said services.

The company fails to list your rights and what can be done to improve your credit score on your own at no cost.

The organization recommends that you avoid contact with the most popular credit reporting companies.

The group claims that they can remove all negative credit information, even if the information is up to date and accurate.

The organization suggests that you invent a "new credit identity" and as a result, a new credit report, by applying for an Employer Identification Number instead of your Social Security Number. These numbers are legitimate, and often used by businesses for financial reporting, but they should NOT be used as a substitute for a Social Security Number. This is a federal offense.

The organization may also advise that you dispute all information on your credit report, regardless of accuracy and current status.

Social Security Number Fraud

Some of these companies will also sell alternative or pseudo-Social Security Numbers (SSN) illegally, which could set you up for heavy fines and even prison time. These organizations lie and say that the process is legal, but it is, in fact, a scam.

These companies often sell stolen Social Security numbers, many taken from children. By using these stolen numbers as your own, you can be arrested for identity theft. It is a crime to lie on a credit or loan application, misrepresent your SSN and to obtain an Employer Identification Number under false pretenses. Here's more information on social security number fraud.

Your Credit Rights

The Credit Repair Organization Act has made it illegal for credit repair companies to lie about their work and how they can help you. They are also prohibited from charging you before their services are completed. This law also requires these companies to explain your rights as a Credit Score possessor. These companies must explain:

  • Your legal rights in a written contract alongside the exact service they promise to perform
  • The three day right to cancel without penalty
  • An estimate of how long the results will take
  • The total cost of the work to be done
  • Any other guarantees promised by the company

Reporting Fraud

Fraudulent Credit Repair Companies can be held accountable if they do not live up to their promises. You have options, including seeking arbitration in federal court for your losses or payments (whichever is more), seeking punitive damages from the company for violating federal law, and joining a class action lawsuit against the company.

It is important to report any credit repair fraud. Contacting your State Attorney General is a good start. Filing a complaint with the Federal Trade Commission cannot resolve individual credit repair disputes, but it can cause action against a company if there's a pattern of possible law violations. You can file a complaint online or by calling them directly, at ftc.gov/complaint or 1-877-FTC-HELP.

More Information on Scams

How to Avoid Scams
How to tell if a job is a scam, typical employment scams, work at home scams, and how to avoid scams.

How to Report a Scam
Have you been scammed or almost scammed? Here's information on how to report a scam, including where and how to report an employment scam.

Scam Warning Signs
What's a scam and what's not? It can be difficult to tell the difference between scams and legitimate job openings, especially when it comes to work at home. Here are scam warning signs to watch for and how to spot a scam.

Related Articles: Credit Report Scams | Employee Credit Checks

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