As time goes on, credit scores are being used for more and more purposes by more and more entities that affect our lives. Once upon a time 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, including home software and professional credit repair service companies. Unfortunately, some of these companies 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. In addition to prohibiting credit repair companies from charging upfront fees or lying about their capabilities, it requires them to provide their customers with certain information and rights:
- They must allow a three day grace period to cancel the agreement
- They must give a detailed and explicit accounting of their fees
- They must say how long it will take for the customer to see results
- They must specify and explain any guarantees they make
- They must provide a written contract detailing all of the above in addition to the customer’s 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 is not to be trusted. Upfront fees in particular are very common, as are opaque pricing models and a failure to disclose your right to a free credit report. But there are also other red flags to look out for that suggest the company you are dealing with is a scam.
One common sign of a scam is when they make unrealistic or impossible promises, such as a guaranteed improvement of your credit score or an improvement by a specific amount. It is impossible for them to know ahead of time if they will be successful, or 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 for you a new credit profile. This is not only a scam; it is also a crime that can get you in trouble too. If, in the U.S., they sell you a new Social Security number (SSN) or ask you to apply for an Employer Identification Number (EIN) from the IRS, 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 in 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 believe you’ve been the victim of a credit repair scam, contact MyChargeBack today for a free consultation with our fund recovery experts.