So, your credit isn’t great, and you want to fix it. Doing it on your own hasn't been working, and you need some support. You decide to search for credit repair companies. And when you do, hundreds of sites come up. Be very careful as you take this journey, or you may get caught up in a credit repair scam.
Once you've set off on this search, you’ll see tons of ads making huge promises that sound really good. You may even start getting calls or emails from people offering to clean up your credit for you. But a lot of companies in this space are not legit. And working with them could completely trash your credit score. Or saddle you with even more financial problems.
Unfortunately, it's up to you to sniff out the scammers. Luckily, they throw up some very bright red flags...
If you spot any of these warning signs, you're looking at a credit repair scam:
- They ask for money up front, before they do anything. That’s illegal. In fact, they can’t even ask you for payment until they’ve done everything they promised to do. Some practiced scam artists try to get around this by charging you a monthly fee – but upfront payments are illegal, no matter what they look like.
- They guarantee that they can raise your credit score by a fixed amount. That guarantee counts as a “deceptive practice,” and it’s against the law.
- They advise you to include false information on a credit card or loan application, which is a federal crime.
- They recommend that you dispute everything in your credit report, even if you know the information is accurate. That’s illegal. You can’t mislead credit reporting companies to change your credit.
- They promise to remove negative credit information, even if it’s current and correct. This is another deceptive practice – timely and accurate information can’t be removed from your credit report.
- They warn you against contacting any creditors or credit reporting companies on your own. That’s because they don’t want you to find out that you can do this without them.
- They offer you a “new credit identity” by providing you with a 9-digit “credit protection number” (CPN) or having you apply for an employer identification number (EIN). Either way, this practice is illegal. Doing this can land you in serious legal trouble. The risk is even higher with a CPN, which is most likely a stolen Social Security number... because that makes you an identity thief.
If you're the victim of a credit repair scam, you can fight back. Visit the Federal Trade Commission to report credit repair scams, and learn how to take the con artist to court and get your money back.
Honestly, no credit repair service – even a legit credit counselor – can do anything for you that you can’t do yourself. And if you’ve already signed up with a service, you have three business days to cancel that contract for any reason.
To learn the right steps involved in fixing your credit, the best ways to pay off high-interest debt, and how to use borrowing to your advantage, grab a copy of my book Debt 101.