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Common Credit Repair Scams Affecting Debtors

Posted on: 26th Feb, 2006 10:57 pm
There are companies claiming to get rid off negative items from your credit report so that a better credit score gets recorded within a short period. But most of them fail to deliver the appropriate services and customers end up losing money. Even the Federal Trade Commission (FTC) is of the opinion that there is hardly any legitimate credit repair company. Therefore, it is better to try and improve your credit score yourself rather than spend more on the services provided by these organizations.

What are the common credit repair scams?

Credit repair services nowadays involve a lot of scams, thereby charging borrowers against false promises of providing better credit rating. Some of the scams are given below:
  • Temporary removal of negative items:
    Credit repair companies may claim that they have fair business relationship with a credit bureau. They deluge the bureau with disputes over the debts recorded in your credit report. These debts may disappear from your report once the bureau starts the investigation.

    The credit repair company charges a fee in return of the temporary removal of negative items from your report. Moreover, these companies demand a charge upfront, which goes against the Credit Repair Organizations Act. There are also companies offering services in order to convince creditors that you don't owe any debt. But this isn't effective and in the end, you are forced to give up the claim.

  • Applying for a new credit report:
    Another credit repair scam involves the companies demanding that they can help you get a new clean credit report. Some firms will help customers apply for a new taxpayer's identification number or Employer Identification Number (also known as EIN) in order to build a new credit history. But this is not a legal process, and the new report carries similar information as in the previous report, although you have a separate identification number.

  • Ensuring a clean report:
    Credit repair companies may also claim to clean up your credit fast and help you get a mortgage or credit card through their contacts. They demand a lot of money in exchange of such services. But in reality, these organizations pretend to offer credit counseling help or try to act as mortgage companies and finally they leave the customers after pulling out a lot of cash. This is the most popular scam nowadays and the costliest one too.
How can you protect yourself from such scams?

In order to prevent yourself from being a victim of such scams, you can take the help of legitimate counselors. They will, in fact, discuss on your financial details and suggest specific ways to come out of your problems. But before you accept such suggestions, you should consider the following aspects.
  • Verify the true identity of the credit repair company.
  • Check with your state's regulatory or consumer offices as to whether it has resolved similar problems before.
  • The mode and amount of payment.
  • You should have the positive as well as negative aspects of the company's plans.
  • Be careful when the company contacts you at its own interest.
Consumers have certain rights under The Credit Repair Organization Act. Any false claim by a credit repair company is prohibited by law and it can't charge you until it has provided you with its services. Through a written contract, these companies must disclose your legal rights, the services that they are going to perform and the required time period. The contract should also mention the total cost to be charged and any guarantee that may be offered. As a consumer, you have three days to cancel the contract without paying any charge.

If you feel you are a victim of any credit repair scam, you may report it to the local consumer affairs office or state Attorney General for justice. You may also lodge a complaint with the FTC that ensures protection of customers against any kind of fraud. The best way to avoid credit repair scams is to make suitable plans for managing personal finance and debt payments. This will ensure a clean credit report and hence a better credit rating.

Related References
I agree with you jessica, even my wife almost got into this kind of trap but thank to charles (my friend) who gave us knowledge on this and save us from getting into trouble.

Yeah you are right, we should not trust any companies who claim to repair your credit score with ease.

Thanks jessica for such lovely knowledge.
Posted on: 27th Feb, 2006 03:31 am
Yes many consumers do get affected by the unfair practices of these credit repair companies.

Instead of any improvement in their credit score, they lose money out of their pocket for nothing.
Posted on: 27th Feb, 2006 10:09 am
I agree with you Ken, we should try and improve credit score with our effort and should not take help from the credit repair companies.

If there is a genuine problem then no one can change it by any magic. So, what the credit repair companies can do, we can do as well.

Posted on: 27th Feb, 2006 10:13 am
how can we find out if the company is not scam us
Posted on: 12th Mar, 2009 04:24 pm
Hi Von,

Your query has been answered in the given link:

Take a look at it. I hope it will help you.

Posted on: 12th Mar, 2009 10:02 pm
Hi All, I think you should consult a credit repair company as I did, I had issues in getting loans but all is now, you must check out their profile , Its a DO it Yourself thing to get rid of bad credit.

Posted on: 11th Oct, 2009 09:03 am
general rules of thumb:

1. research is good. check out your options, don't just go with the first person you find. when you pick someone to go with. google them, look for something like "[company name] complaints" etc and see if anything negative has been posted on the web about them.

2. If it looks too good to be true it probably is. people offering wonder cures are usually preying on the desperate and helpless. As questions about how they will achieve the results that promise and don't swallow lines like "using our expertise to operate at the highest levels" or similar junk. if you can't understand how they are going to be able to do what they promise you - they probably can't do it.
Posted on: 15th Oct, 2009 08:16 pm
Telling you to argue and dispute all the history and detail on any of your three credit reports is a pure indication of a scam. You ccan't dispute any right information. You have to proof to file a dispute.
Posted on: 12th Jan, 2010 04:06 am
well said, fdi. another thing that is interesting is that automated underwriting now looks at disputes on a credit report as a negative and that directly results from all of the bogus disputes filed by these scam artists.

how dare we call them "artists?" that's an affront to those who actually perform artistry.
Posted on: 12th Jan, 2010 10:33 am
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