Credit repair is a legitimate industry with numerous companies that can assist you in building good credit. But be wary of scammers. According to the Federal Trade Commission, many credit repair scams target financially distressed consumers such as those behind on loan or credit card payments and worried about the state of their report. Smooth-talking operators lure consumers in by falsely promising that negative information can be removed even if accurate. They fail to inform customers they can receive one free copy annually and dispute errors without incurring a fee.
Reputable credit repair companies should offer you free information about their services and what they can do for you, along with a written contract outlining all details, including any guarantees they offer, duration and total costs involved. By law, cancellation can occur without penalty within three days.
Some credit repair scams claim they can erase negative marks from your report by disputing them, when in reality that can be accomplished free of charge by disputing them yourself. You should be wary of companies offering credit repair that demand that customers contact credit bureaus directly as this is illegal.
Warning signs for credit repair scams include companies offering guarantees of an increase in your credit score or claims they can eliminate negative information from your report, which is impossible. Some scams also suggest using nine-digit numbers such as EIN or CPN instead of your Social Security number which is illegal and could lead to identity theft.
Another popular credit repair scam involves “piggybacking.” Under this scheme, Consumer A with good credit adds Consumer B with poor credit as an authorized user for a fee – giving him or her an opportunity to establish positive credit histories that appear both ways on both credit reports. Unfortunately, Consumer A is still responsible for paying their debt and could face legal action if their report indicates it as joint account status.
Protect yourself from credit repair scams by understanding what to look out for and asking the appropriate questions. A reliable credit repair service should be part of the Credit Repair Organizations Association, willing to provide a list of member companies. In addition, check their complaint history with both Better Business Bureau (BBB) and Federal Trade Commission (FTC) prior to engaging their services; finally remember you can cancel them within three days if not completely satisfied! If unable to locate one legitimately there may be nonprofit organizations available which specialize in budgeting/debt management assistance/or you could negotiate terms directly with creditors directly – they could all help!
