Watch Out for These Credit Repair Red Flags

While the economy has been improving overall many Americans still struggle with their credit history. Currently, over 68 million have a bad or poor credit score (lower than 601) and are looking for fast, easy ways to fix or even erase damage to their credit history.

With this demand, the credit repair industry has boomed. Offers for miraculous credit repair are common in radio, television, newspaper and direct mail advertising. Some unscrupulous companies require consumers pay large fees upfront to erase any blemishes on credit records. Most of what they charge for can be done at little to no cost by a consumer.

Legitimate credit and debt counseling services are available for a low fee or, in some cases, for free. This counseling service will work out a payment plan with lenders, as well as provide guidance and advice to help consumers make more financially sound decisions in the future.

Beware of companies that:

  • Guarantee that they can erase bad credit. No one can legally remove accurate and timely negative information from a credit report
  • Do not tell you your legal rights and what you can do for free. By law, credit repair organizations must provide a copy of the “Consumer Credit File Rights Under State and Federal Law.” This one-page document outlines the consumer’s rights in disputing inaccurate information on their credit report, and also addresses consumers’ rights in dealing with credit repair companies.
  • Three Day Cooling Off Period. Consumers have the right to cancel a contract with any credit repair organization for any reason within three business days from the date the contract was signed.
  • Recommend that you not contact a credit bureau
  • Want you to pay up front for credit repair services.
  • Advise you to dispute all information in your credit report
  • Offer to help you secure a new Social Security Number (SSN). It’s nearly impossible to get a new SSN.
  • Create a new credit identity for you by obtaining a federal employer identification number to use instead of a social security number. This is illegal.
  • Offer to let you piggyback on other consumer’s good credit. Doing so can actually make you liable for loan fraud. Source: bbb.org.

Be sure that the company provides a written contract that clearly states the terms of the contract, plus your rights and obligations. Read it carefully before signing.

Remember, everyone is entitled to a free copy of their report from all three credit reporting bureaus every year or if they have been denied credit within the last 30 days. To check your credit report go to: www.AnnualCreditReport.com. Consumers can also request a review of information in their file that they feel is inaccurate or incomplete, for which there is no charge.

To learn more, check out the following resources.

How Many Americans Have Bad Credit?

Florida Bar Association Consumer Tip: CREDIT REPAIR FRAUD

Credit Repair Scams

Choosing a Credit Counselor

BBB News Release: Watch Out for These Credit Repair Red Flags

If you would like to report a scam, call your BBB at 256-533-1640 or go to the BBB Scam Tracker. To find trustworthy businesses, visit bbb.org.