Credit Repair Scams

As time goes on, credit scores are being used for more and more purposes by more and more entities that affect our lives. Way back when, a credit score was used only to validate a consumer’s reliability to pay for personal loans, credit cards, mortgages, and the like. But now even potential employers and landlords are increasingly pulling credit scores to determine if you qualify for a job or an apartment.

It comes as no surprise, therefore, that consumers are taking a more active role to repair poor credit scores. Various industries have grown to take advantage of this trend. These include home software and professional credit repair service companies. Unfortunately, some of them are total scams.

Laws and Regulations Exist to Protect Consumers from Predatory or Fraudulent Business Practices

In the United States, the most prominent consumer protection legislation may very well be the Credit Repair Organizations Act of 1996. It prohibits credit repair companies from charging upfront fees or lying about their capabilities. It also requires them to provide their customers with certain information and rights. You are entitled to the following:

  • A three-day grace period to cancel the agreement
  • A detailed and explicit accounting of the fees you will pay
  • A timetable so you will know beforehand how much time it will take to see the results
  • Specification and explanation of any guarantees they make
  • A written contract detailing all of the above in addition to your legal rights. Among the latter is your right to a free credit report once a year from each of the credit reporting agencies.

Obviously, any credit repair company that fails to do any of the above should not be trusted. Upfront fees, in particular, are very common. So are opaque pricing models, and failing to let you know you have a right to a free credit report. But there are also other red flags to look for that suggest the company you are dealing with is a scam.

Look Out for These Red Flags

One common sign of a scam is unrealistic or impossible promises. These include guaranteeing an improvement in your credit score. Or guaranteeing it will be adjusted to a specific score. It is impossible for them to know ahead of time if they will be successful. And they cannot know in advance how successful they will be. If they say they’re sure, they’re lying.

Another sign of a scam, and a very serious one, is if they claim the ability to create you a new credit profile for you. This is not only a scam; it is also a crime that can get you in trouble too.

In the U.S., for example, they may attempt to sell you a new Social Security number (SSN) or ask you to apply for an Employer Identification Number (EIN) from the IRS. If so, they are making you a party to possible federal crimes. The new SSN may have been stolen from someone else. And while EINs have valid legal uses, credit scores and applications are not among them. If you ever put a number other than your SSN on a form that requires it, you are breaking the law. You are allowed to withhold your SSN if you wish (and probably get rejected as a result). But you are not allowed to lie.

And of course some scammers, regardless of what they promise or how much they charge, end up doing little or no work on your behalf.

If you think you’ve been the victim of a credit repair scam, contact the fund recovery experts at MyChargeBack