Recognizing a credit repair scam
Warning signs for credit repair scams include companies that ask
you to pay before providing services. The company may tell you it
can guarantee a specific increase in your credit score or get rid
of negative credit information in your credit report, even though
the information is accurate and current.
If you see ads or receive offers to repair or fix your credit, it
could be a warning sign if the company:
- Pressures you to pay up-front fees. The company wants you to pay before it provides any services. A
simple rule to follow is Don’t pay upfront.” If the company uses
telemarketing such that the federal Telemarketing Sales Rule
applies, the credit repair company may not request or receive fees
until it gives you a credit report generated more than six months
after the promised results that shows the results. Under the
federal Credit Repair Organizations Act, credit repair companies
can’t request or receive payment until they’ve completed the
services they’ve promised. Some companies will structure monthly
payment plans to try to avoid this requirement. You should know
that all forms of upfront payment before services are completed are
- Promises to remove negative information from your credit report. The company tells you it can get rid of the negative credit
information, even if that information is accurate and current. No
one can do this.
- Requests you dispute accurate information in your credit report.
The company advises you to dispute all the information in your
credit report, regardless of its accuracy or timeliness.
- Refuses or avoids explaining your rights to you. The company doesn’t tell you your rights and what you can do for
yourself for free. Disputing errors in your credit reports is a
free legal right available to you under the Fair Credit Reporting
Act; you don’t need to pay a credit repair organization to do it
for you. Also, if you have just signed up for a credit repair
service, you have the right to cancel your contract with any credit
repair organization for any reason within three business days at no
charge to you.
- Tells you to not contact credit reporting companies. The company recommends that you don’t contact any of the
nationwide credit reporting companies directly.
Credit repair companies are subject to numerous federal laws,
including the Credit Repair Organizations Act and often the
Telemarketing Sales Rule, both of which forbid credit repair
organizations from using deceptive practices and from accepting
up-front fees. These laws prohibit many deceptive practices by
credit repair organizations. You may have a right to sue a credit
repair organization using these laws.
How do I find a reputable credit counselor?
Most credit counselors offer services through local offices,
online, or on the telephone. You can find a list of approved credit counselors online.
Once you've developed a list of potential counseling agencies,
check them out with your State Attorney General’s office, and local
consumer protection agency.
Finally, ask the credit counseling agency for free information
about their services and what they provide.A reputable credit
counseling agency should be willing to send you free information
about itself and the services it provides without requiring you to
provide any details about your situation. If a service doesn’t do
that, consider it a red flag and go elsewhere for help.
If you have just signed up for a credit repair service, you have
the right to cancel your contract with any credit repair
organization for any reason within three business days.