Avoiding Credit Repair Scams

You're up to your eyeballs in debt and getting a lot of calls from collection agencies. You're starting to feel desperate about making it all go away and have even thought about bankruptcy as a possibility. Then you see an ad or get a flier in the mail from a credit repair company claiming that, for a fee, they can erase your bad credit and give you a new credit identity. Does it sound too good to be true? It probably is.  

The Federal Trade Commission ("FTC") is cracking down on credit repair websites that promise consumers they can restore their creditworthiness for a fee. More than180 websites have been put on notice that their credit repair claims may violate state and federal laws. According to the FTC, many credit repair operations "guarantee" they can remove negative information from consumers' credit report even if the negative information is accurate and timely. This is not true!!!!!!!!!!! The FTC has also identified more than 60 credit repair operations that sell instructions on how to substitute a false social security number for your current number and create a new credit identity. Doing so is a violation of federal law. 

Be Aware of False Claims

Consumers need to remember three things about “credit repair" says Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "First, accurate and timely negative information cannot be removed from a credit report in an effort to repair it. Second, it's not only a bad idea to create a new credit identity using a false Social Security Number, it's also illegal. And third, when it comes to credit repair, only time and a personal debt repayment plan will improve your credit report."

If you decide to look into a credit repair offer, beware of the following warning signs offered by the FTC:

  • The company wants you to pay for credit repair services before any services are provided.
  • They don't tell you your legal rights and what you can do for yourself for free.
  • They recommend that you not contact a credit bureau directly.
  • They suggest you invent a new credit identity by applying for an Employer Identification Number to use instead of your social security number.
  • They advise you to dispute all information in your credit report, or do something else that seems illegal.

Under the federal Credit Repair Organizations Act, credit repair companies can't require you to pay them until they've completed the services for which you contracted. You also have the right to cancel your contract with a credit repair company within three days of the day you sign it.

How to Improve Your Credit Rating Yourself

Here are a few tips from the FTC on how you can improve your credit rating yourself:

  • You have the right to dispute inaccurate information in your credit report by contacting the credit bureau directly. The credit reporting agency must change or remove inaccurate or incomplete information.
  • If the credit bureau's investigation doesn't resolve the dispute to your satisfaction, you can send a brief statement explaining your side of the story. The credit reporting bureau must include a summary of your statement with any report they issue about you.
  • You have the right to obtain a copy of your credit report from a credit bureau. There's no charge if, within the last 60 days you've been turned down for credit, employment, insurance, or as a tenant because of information in your credit report.
  • You're also entitled to a free copy of your credit report if you're unemployed and intend to apply for employment in the next 60 days, if you're receiving public welfare assistance, or if you think there's inaccurate information in your credit report due to fraud.
  • Any contract you sign with a credit repair service must include the payment terms for services (including the total cost), a detailed description of all services to be performed, how long it should take to get results, any guarantees, and the company's name and business address.

The reality is that no one can make accurate negative information disappear from your credit report. Only the passage of time, i.e., seven years for most information and ten years for bankruptcy information.

Assistance from the EAP

The Employee Assistance Program (EAP) offers individual telephonic consultations with financial specialists at no cost to eligible employees on credit matters. Call 1-888-275-1205, option 7 for more information.