How to Spot Credit Repair Scams
There are many things credit repair companies are not allowed to do or promise customers. If it sounds like it’s too good to be true, it probably is, and you should steer clear of that company. Here is a list of signs that you should look out for that may be a red flag that a company is not legitimate.
1. Company claims Guaranteed Results
Under the Credit Repair Organizations Act (CROA), credit repair companies cannot guarantee results. Here are a few common examples of false promises unethical credit repair companies might make:
- Improvement to your credit score
- Results in a fixed time period
- Removal of all of negative items, even if they are accurate
2. Upfront Payment is Requested
The CROA prohibits credit repair companies from asking for any payment before they provide any services. Many scammers know that most consumers don’t know this and, as a result, promise a quick turnaround on credit repair for a large upfront payment. Again, if it sounds to good to be true, it probably is.
3. Claims a New Identity is Needed
A credit repair company can’t promise or offer you a new identity. Anyone offering you a new identity is a fraud. Besides guaranteeing results, scammers may try to promise you a clean slate with a new Employer
Identification Number (EIN) or a Credit Privacy Number (CPN).
They tell you to use these numbers on your future credit applications instead of your Social Security Number. We explain more about common credit repair scams below.
4. Don’t Explain Your Legal Rights
Credit repair companies should explain your legal rights to you from the beginning. These are a few
common things an unethical credit repair company might do.
- Tells you not to contact the credit bureaus directly
- Doesn’t give you a copy of the contract to review before signing
- Fails to inform you that you can repair your credit yourself without the help of a credit repair company
- Leaves out important information from the contract, like the date services will be executed or that amount you will pay
If you feel like the company isn’t telling you everything or refusing to answer your questions, you should seek services elsewhere.
5. Asks You to Misrepresent Information
Finally, an unlawful credit repair company might ask you to misrepresent your information. This can range
from unlawfully using an EIN or CPN number in place of your social security number to claim you are a
victim of identity theft when you’re not.