Four ways to detect a credit repair scam
- By Stuart Hunter
- Published 11/20/2009
- Credit
- Unrated
Four ways to detect a credit repair scam
The Federal Trade Commission (FTC) is charged with the enforcement of consumer protection law and has the responsibility of shielding you and me from unscrupulous companies that steal our business through false claims and, quite simply, by breaking the law. With regards to dishonest credit repair services, practices like these became so common that a federal law was passed to outline how credit repair companies can operate. The Credit Repair Organization Act (CROA) was passed to protect consumers and provide them with recourse if they are a victim of a dishonest credit repair company.
When researching credit repair services, there are some glaring red flags that should warn you to stay clear. According to the FTC, avoid services that:
Require Payment in Advance - Credit repair companies shouldn't require payment prior to services being rendered. Under the Credit Repair Organizations Act, these credit repair companies cannot require payment until after they have completed the services promised.
Do Not Disclose Your Consumer Rights - Legitimate credit repair organizations will inform you that you can order one free copy of your credit reports every 12 months from the credit reporting agencies, and that you can dispute inaccurate or questionable items on your own , free of charge. If a company does not alert you to this information, specifically in the form of a CROA required disclosure titled "Consumer Credit File Rights Under State and Federal Law", take your business elsewhere.
Endorse Creating a New Identity - Some shady credit repair companies will go so far as to advise you to create a new credit identity by creating and using an Employer Identification Number (EIN) in place of your Social Security number on credit applications. This is a serious crime and if anyone suggests this as an option, run the other way.
Misrepresent the Services They Can Provide - Be wary of credit repair companies that guarantee to remove negative and accurate items, such as late payments and foreclosures, from your credit reports. No one can guarantee that items will be removed, particularly if the items are true.
When researching credit repair services, there are some glaring red flags that should warn you to stay clear. According to the FTC, avoid services that:
Require Payment in Advance - Credit repair companies shouldn't require payment prior to services being rendered. Under the Credit Repair Organizations Act, these credit repair companies cannot require payment until after they have completed the services promised.
Do Not Disclose Your Consumer Rights - Legitimate credit repair organizations will inform you that you can order one free copy of your credit reports every 12 months from the credit reporting agencies, and that you can dispute inaccurate or questionable items on your own , free of charge. If a company does not alert you to this information, specifically in the form of a CROA required disclosure titled "Consumer Credit File Rights Under State and Federal Law", take your business elsewhere.
Endorse Creating a New Identity - Some shady credit repair companies will go so far as to advise you to create a new credit identity by creating and using an Employer Identification Number (EIN) in place of your Social Security number on credit applications. This is a serious crime and if anyone suggests this as an option, run the other way.
Misrepresent the Services They Can Provide - Be wary of credit repair companies that guarantee to remove negative and accurate items, such as late payments and foreclosures, from your credit reports. No one can guarantee that items will be removed, particularly if the items are true.
Stuart Hunter
Providing credit repair services since 1991, Lexington Law has helped over 500,000 clients legally take on their credit. Last year alone, Lexington Law helped clients remove over 600,000 negative items from their credit reports.
View all articles by Stuart Hunter