Credit Repair Scams Are Everywhere
Credit repair agencies often carry a negative connotation because there are so many fraudulent companies running credit repair scams, and they are preying on uneducated consumers with bad credit. These consumers become desperate for help to improve their credit situation, and their despair is preyed upon. Credit repair companies cannot remove accurately reported information. However, they can remove false, derogatory information resulting from inaccurate reporting. While it is known, we can all try to get incorrect items removed from our credit reports for free. Likewise; we could represent ourselves in court.
Knowing when to delegate crucial tasks that are out of our scope and expertise is an essential ingredient to a more successful outcome. Before hiring any credit repair agency, you must do some research. Make sure the company is CCA Certified, BBB A+ rating, and registered and insured in your state.
The FTC reported that 70% of credit reports have mistakes on them; furthermore, more than 50% of people with those mistakes will do nothing about it. Why? Credit repair is not a simple task. You see all over the net how you can do it yourself for free. Well, I tried, and the first response I received was all my disputes were verified. Although, I knew they were inaccurate. They lead me to believe my case was closed, so I thought it was pointless to fight because they would just keep saying, “Verified.” I was so frustrated feeling powerless that I spent over two years researching and studying the credit repair process. I came to learn verified is not when you give up, but when you should really begin to fight. I learned the laws and language necessary to defend myself, and after 7 months and 62 letters, I had the negative items removed.
It takes due diligence, education, and a whole lot of patience for a successful outcome. This is precisely why smart people delegate to professionals. Many companies who have given the credit repair industry a bad name obviously do not follow these practices. They are busy looking for a quick buck and the next sucker to come along. They do not focus on helping people really repair their credit. They go after what they consider the low hanging fruit. The individuals who are willing to spend their last dollar and feel they have no other option other than to do so… This is the main reason why I put this blog together. I want to inform, educate, and protect consumers from being manipulated and taken advantage of in vulnerable times. Here are the top credit repair scams I have found during my time in the industry.
6 Of The Most Common Credit Repair Scams
Fraudulent companies know that if you are searching for credit repair services, you are probably eager to find a service who will get it done fast and cheap. Don’t get fooled by illegitimate companies by following these tips to help identify a real credit repair service and prevent any further problems with your finances.
- Asking for payment before providing service. This is criminal! Federal law states that a credit repair organization CANNOT request payment from you before they complete any and all services that they have promised to resolve. These companies are hoping that you are frantically searching for a solution and disregard the fact that you are paying for something before even getting what you paid for.
- If the offer sounds too good to be true, it probably is. Don’t forget, credit repair agencies can only remove inaccurate or unfair information from your credit report. A pretty clear indicator that you are getting scammed is if they are offering to boost your score by some obnoxious amount by removing every negative item on your report. If something is negatively affecting your credit; as a verified late payment to a credit card, there is nobody in the world that can get that removed for you. Scammers are just hoping you aren’t educated enough to know what can and cannot be removed from your credit report.
- They offer overnight results. Even the best credit repair organizations take about 30-45 days just to investigate disputes. After that, the entire dispute process takes about 6 months to communicate with the credit bureaus; Experian, Equifax, and TransUnion, to provide information regarding disputes, the review process and verify said inaccuracies, and then get the false information removed from your credit reports. This is a reasonable timeframe for most legit credit repair organizations, and any company that promises that they can get it done significantly faster than the timeline as mentioned above; more than likely is a scam.
- They won’t let you cancel your contract. This is a massive no-no in the credit repair industry. By federal law, credit repair organizations are legally obligated to allow you to cancel your contract within at least 3 business days of signing the contract. I say at least because some of the more reputable repair companies will allow an even more extended grace period to cancel if you are unsatisfied with their services. This is what you want to look for in a potential credit repair company because you know they care about their clients and don’t want to just take their money and run with it.
- They don’t make you aware of your legal rights. Every credit repair organization is required by federal law to provide their clients with a written disclosure of their legal rights BEFORE they sign any type of agreement with the organization. If a company is trying to rush you through the process by skipping steps like these, that should be a monumental red flag, and you should NOT sign anything. This is how they manipulate people who don’t know that they are entitled to be made aware of their rights. Their goal is just to get them to sign the contract and take their money before they have any idea what even happened.
- If a company is offering you a new identity in some way, shape, or form stay away. Some credit repair scammers have been known to advertise a clean slate, free from all of your past credit problems. They will instruct you to use your EIN, employee identification number, or your CPN, credit privacy number, on your future credit applications instead of your social security number, which is absolutely not allowed.
If you come across any of these types of credit agencies, you should cut all communications with them immediately, report your experience to the Attorney General’s office in your state, and file a complaint with the Federal Trade Commission. These businesses make a living off of your ignorance, so the best way to combat them is to educate yourself, so you don’t fall for their traps.
Credit Repair Contract Requirements
Once you believe you have found a credible credit repair agency that fits your wants, you will still want to make sure you are educated enough to review your contract to make sure you are getting the most out of your agreement, and not getting taken advantage of. Here is a brief list of must-haves for any credit repair contract.
First of all, a contract must be given to you, and you must review and sign it before any services are performed by the business. This is just to protect you from getting into any fishy business. The idea is that they have to write out exactly what is to be done throughout your business relationship, so you know exactly what you are getting into.
Secondly, every credit repair business is required to allow you a 3 business day cancellation period. Some companies will allow more time, but 3 business days is the mandatory minimum requirement that every company must offer.
Every contract must include certain things to ensure transparency to clients. This consists of the payment amount, a clear description of the services that will be performed, an estimate of the time it will take or the exact date the services will be completed, and a clear statement letting you know that you can cancel your contract within 3 days; no penalties and absolutely no questions asked.
Lastly, no credit repair organization can ask you to sign a form waiving your rights that are protected under the Credit Repair Organizations Act. These are federally protected rights that cannot be taken away from you by anybody.
How to Report a Company Running a Credit Repair Scam
If you come across an organization that is in violation of any of these laws, or if you feel as though you are being scammed; you can file a lawsuit against an organization for actual damages, which would be the amount of money you lost in doing business with this phony company. You have the right to request punitive damages, which is the amount that the courts deem necessary for the company to pay to you for their actions, and for lawyer fees. You can make your reports to the Consumer Financial Protection Bureau, your state attorney general, and file your lawsuit in your state. There is a statute of limitations, however. You are required to submit your lawsuit within 5 years of the date of the violation, or when you became aware of the breach in contract, to take legal action against the credit repair organization.
Having bad credit can make your life extremely difficult. It is much harder to get approved for loans or credit cards, not to mention if you do get one the interest rates are not going to be favorable, and it can also impact your insurance premiums as well. Your credit score may also determine a future employment or housing decision. If your score is not where it should be, they may choose to pass on you if they don’t like what they see.
In conclusion, credit repair is a long and tedious process. It is not something you want to rush so when you see a credit repair company offering obnoxiously fast service, you will want to look for a different company. This is something that involves a great deal of research and a lot of discipline. You can either do your own research, write out your personal disputes, and deal with the credit agencies yourself, or you can delegate that out to professionals. Whichever route you choose, just make sure you stay educated and stay away from fraudulent businesses. For more information on this topic, please visit our credit repair help page.