How to Spot Credit Repair Scams
Many fraudulent credit repair companies prey on financially distressed consumers. Typically, these companies ask you to pay a fee to delete negative items from your credit report and change your social security number. The process of improving your credit score takes time, and you should be aware of any company that requires upfront payments to begin the process.
Fraudulent credit-repair companies target financially distressed consumers
A growing number of credit repair companies target financially distressed consumers by offering services that may not be legitimate. These companies often appear as online retailers that invite consumers to submit credit applications. The companies typically ask consumers to purchase $100 worth of merchandise in exchange for a credit line, and many advertise approval rates of ninety percent or higher. Unfortunately, these companies are not legitimate and may be attracting synthetic identities.
Many credit repair scams target financially distressed consumers by falsely claiming to remove inaccurate negative information from their credit reports. These firms claim that they can repair credit scores and can help consumers secure loans and credit cards. However, these services often do not improve credit scores and are ineffective at repairing consumer credit reports.
They require you to change your social security number
Changing your social security number is a common scam involving credit repair companies. Some companies will promise you that by using your new number, you can avoid being reported as a fraudulent borrower or a credit risk. However, this is not a legal option. Under federal law, it is illegal to misrepresent your Social Security number on a credit application. Furthermore, many companies will use stolen Social Security numbers to trick you into providing yours.
Most credit repair scams start with a company offering to “fix” your credit score. The company often asks for a fee up front, and then never contacts you again. Once you hand over your Social Security number, the scammers can sell it to other companies. Some scams will even give you a new credit identity. If you use a fake SSN, you can face steep fines.
They remove negative items from your credit report
If you’ve received a credit repair offer, be sure to investigate the company. Some of these companies are scams. It’s best to avoid them at all costs, but there are also some ways to spot them. There are several ways to detect a credit repair scam, and you can avoid them by following a few simple steps.
The first step is to find out if the credit repair company you’re considering can remove negative items from your credit report. Most of these companies will review your report and help you set up a dispute plan with your creditors. They can also suggest ways to fix your credit, like opening new accounts to boost your credit. However, you should be careful about taking on new credit, as it can further damage your credit report.
They charge you a fee
Some credit repair scams offer to give you a new credit identity, a nine-digit “credit protection number” or employer identification number, which can get you in a lot of legal trouble. If you receive such a call, you should report the scam to the Federal Trade Commission and take the con artists to court for the money you paid to them.
Another common scam is a credit repair company that charges you a fee upfront. These companies may promise to boost your credit score by 100 points or more, and they may claim to help you qualify for rewards credit cards or car loans. The Federal Trade Commission warns against hiring companies that charge you in advance for services, and to avoid paying upfront fees.
They do not provide a disclosure
Credit repair scams do not provide a full disclosure of what they do. They also do not explain your rights and responsibilities. For instance, you are entitled to one free credit report every year and to dispute any errors on it. Additionally, if you are unsure if a credit repair company is legitimate, you have the right to cancel the contract within three business days. In addition, there are reputable debt counseling services across the country that can help you understand your financial situation and rebuild your credit.
Some credit repair scams use illegal tactics to trick victims. For example, a credit repair scam may offer a new identity with a credit protection number (often a stolen Social Security number). That is illegal and will land you in legal trouble. Another tactic involves adding a new line of credit to your credit report using a third party’s employer identification number, or EIN, which is considered disreputable by lenders.
They exploit vulnerabilities in your credit report
While there are legitimate credit repair companies out there, you need to be careful of scams. These companies may make exaggerated promises and attempt to gain access to your personal data. In addition, some companies will try to create a false identity to swindle you. The FTC says this is against the law and you should be wary of such services.
Credit repair companies may tell you to obtain a new Social Security number or Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This is illegal and could land you in jail. Some fraudulent companies also offer you an alternative nine-digit number (CPN) that is similar to your Social Security number. This number is not a substitute for your Social Security number and is not recommended for any purpose.
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