How to Recognize Credit Repair Scams

Written by J. Hirby and Fact Checked by The Law Dictionary Staff  

American consumers understand the value of having and maintaining a good credit score. The higher someone’s score, the better the chances are for approval on loans, mortgages and credit card applications. A moderate score or a low score tells lenders that the applicant either has financial problems or has poor debt management skills. Today, potential employers are also looking at people’s credit scores as an indication of how well they handle responsibilities.

Many individuals seek the help of credit repair organizations to repair errors or clean up unjustified negative information on their credit reports. There are companies that say they will clean up credit reports and raise someone’s credit score to the high end of the scale; but in reality they do neither and are only interested in separating people from their money. In truth, when individuals are interested in repairing their credit reports, there is nothing more that a credit repair company can do that individuals cannot already do for themselves. When someone has decided to engage the services of a company with experience in working with credit reporting organizations, it helps to know how to recognize legitimate credit repair services from credit repair scams.

A credit repair organization may be fraudulent if:
–Payment is required for the repair services before any work has been done. This is a violation of the Credit Repair Organizations Act (CROA).
–They promise to remove all negative information, even if accurate.
–They do not inform individuals of their credit repair rights on how they can correct mistakes on their own. This is a requirement of the CROA.
–They ask people to waive their rights under the CROA. Individuals cannot waive their rights.
–Their contracts do not describe the services to be provided and nor the timeline.
–They tell individuals to give false information to credit bureaus. This is an illegal action.
–They do not provide a three day cancellation period without penalty.

A person can check with the Federal Trade Commission, the local Better Business Bureau, and the State Attorney General’s office to see if one or more particular credit repair services have had any complaints. The CROA defines what services a credit repair company can legally provide a consumer. The CROA also makes it illegal for a company to lie about what they can do, or will do, for a consumer.

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