When is a Credit Repair Offer a Scam?
In 2018, according to The Balance, Americans owed more than $1.061 trillion in credit card debt – an average of $8,316 per household. As the cost of living continues to increase, consumers often find themselves unable to cope with high credit card debt, fall behind in their payments, and finally end up with a low credit score. That’s when people start looking for ways to repair their credit and sometimes get themselves in trouble at the hands of unscrupulous credit repair services that promise bogus credit repair services that can be costly and sometimes illegal.
Over the last three years, the BBB has received more than 3,675 complaints related to credit repair services, debt counseling, and debt consolidation. While there are legitimate credit and debt counseling services available to consumers, the Internet is home to countless credit repair sharks, some requiring consumers pay large fees upfront – upwards of $1,500 – and in return may promise to erase any blemishes on credit records, get new Social Security numbers for clients, or allow consumers to piggyback on someone else’s credit record.
The truth is, no one can legally remove accurate and timely negative information from a credit report, that it’s nearly impossible to get a new Social Security number, and that piggybacking on someone else’s credit can be construed as loan fraud.
Consumer Reports notes that 42 million Americans have inaccuracies on their credit reports each year. With the millions of inaccuracies, it is important to check these reports. 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 (go to www.AnnualCreditReport.com). The law does allow an individual to request reinvestigation of information in their file that they feel is inaccurate or incomplete, and there is no charge for this process. Remember, everything a credit repair company can do for them legally, people can do for themselves at little or no cost.
If consumers respond to a credit repair offer, they need to be aware that, by law, credit repair organizations must provide a copy of the “Consumer Credit File Rights Under State and Federal Law”. This 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 as described in 15 U.S. Code § 1679c. Disclosures. A key point is that 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 by the consumer.
Companies must also provide a written contract that spells out the consumer’s rights and obligations. Be sure to read these documents carefully before signing anything. BBB also suggests consumers beware of companies that:
- Do not tell you your legal rights and what you can do – legally – for free;
- Recommend that you not contact a credit bureau directly;
- Want you to pay for credit repair services before any services are provided;
- Advise you to dispute all information in your credit report;
- Take any action that seems illegal, such as creating a new credit identity by obtaining a federal employer identification number to use instead of a social security number;
- Offer to let you “piggyback” on other consumer’s good credit.
Before contacting a credit repair service, consumers can check them out first with BBB at www.bbb.org.
Sources: BBB.org, The Balance, Consumer Reports, Cornell Law School.