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How to Spot and Avoid Credit Repair Scams

Milad Hassibi April 11, 2018


If you feel bogged down with a less than perfect credit score and credit history, you are not alone. Each year, millions of Americans struggle to repair their credit score and reports.

However, this task is time-consuming and requires industry knowledge. Many consumers choose to turn to a professional company who can help repair and rebuild your credit scores for a fee.

It’s important to be aware that unfortunately, many consumers with bad credit are targets for credit repair scams and predatory financial services, so being aware and informed before you make the decision is key.

Thanks to a series of laws such as the Credit Repair Organizations Act, all credit repair companies are forbidden from deceiving consumers.

Thankfully, there are some sure signs that a credit repair company is a scam:

Credit Repair with Upfront Fees

This means that the firm wants you to pay them before they begin any services. Again, thanks to the Credit Repair Organizations Act, no credit repair company is legally allowed to charge an upfront fee until the services promised are completed.

Sadly, some companies are unaware of the fact that they cannot charge an upfront fee and still continue to do so. Do not collaborate with any credit repair company that asks for money up front.

Contracts

 Just as with any service, a legitimate credit repair agency will ask you to sign a contract. Be vigilant and look over this contract thoroughly. The contract should state the fee that you are being charged, specific details on the tasks that the company will be doing for you, date ranges, the businesses information, and a cancellation period if you wish to cancel the services.

If the business does not provide you with a contract, its a safe bet it’s a scam.

Information Removal

 Many credit repair companies use shady and unethical tactics to “clean” your credit report. In some cases, companies have been reported for disputing accurate charges on your credit history.

Some firms may try to argue with the credit bureaus that you were a victim of identity theft in order to remove the charges. Not only is this unethical but also illegal for credit repair companies to do. 

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Specific Claims

Credit repair agencies have clever marketing tactics, which includes broad claims that they can increase your score by X amount. With so many variables that go into your credit score, it is nearly impossible to give an accurate amount your credit score will rise by.   

 

FICO and other credit models do release some information on how your score is calculated, but most of it still remains a secret. No company should be able to make specific claims.

Waivers

Some less than ideal credit repair companies will also ask you to waive the rights granted to you by the Credit Repair Organizations Act. Thankfully, the law also voids any waiver of rights that you may have signed in the process. The rights provided to you by the CROA cannot be waived in any circumstance.

Final Note

If you feel that you are already a victim of a fraudulent credit repair company, do not let the company get away! You can report the company to the Federal Trade Commision and also the attorney general in your state.

 

 



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