Avoiding Credit Repair Scams

You're up to your eyeballs in debt and getting a lot of calls from collection agencies. You're starting to feel desperate about making it all go away and have even thought about bankruptcy as a possibility. Then you see an ad or get a flier in the mail from a credit repair company claiming that, for a fee, they can erase your bad credit and give you a new credit identity. Does it sound too good to be true? It is.

Everyday, many companies try to appeal to consumers with poor credit histories. After you pay the fee, these companies do nothing to improve your credit report. Choosing credit repair assistance from one of these companies will only worsen your financial situation by wasting your time and putting you further behind on your debts.

Neither you nor a credit repair company has the right to remove accurate, current information from a credit report. Only the passage of time–seven years for most information, 10 years for bankruptcy information–can accomplish that.

Warning Signs of Scam

If you decide to look into a credit repair offer, beware of the following warning signs offered by the Federal Trade Commission ("FTC"):

• The company wants you to pay for credit repair services before any services are provided
• They don't tell you your legal rights and what you can do by yourself for free
• They recommend that you not contact a credit bureau directly
• They suggest you invent a new credit identity by applying for an Employer Identification Number to use instead of your Social Security number
• They advise you to dispute all information in your credit report or do something else that seems illegal

If you follow the illegal advice of one of these companies and you commit fraud, you may be subject to prosecution. You could be charged and prosecuted for mail or wire fraud if you use the mail or telephone to apply for credit and provide false information. It's a federal crime to lie on a loan or credit application, to misrepresent your Social Security number and to obtain an Employer Identification Number from the Internal Revenue Service under false pretenses.

Credit Repair Organizations Act

Under the Credit Repair Organizations Act, credit repair companies cannot make false claims about their services, require you to pay until they have completed the services they have promised or perform any services until they have your signature on a written contract and have completed a three-day waiting period. During that time, you can cancel the contract without paying their fees.

Any contract you sign with a credit repair company must include:

• The payment terms for services (including the total cost)
• A detailed description of all services to be performed
• How long it should take to get results
• Any guarantees
• The company's name and business address

What You Can Do

Everything a credit repair company can do for you legally, you can do for yourself at little or no cost. You may do the following:

• Dispute mistakes or outdated items for free.
• Receive a free report if a company takes adverse action against you, like denying your application for credit, insurance or employment, and you ask for your report within 60 days of receiving notice of the action.
• Receive one free report a year if you're unemployed and plan to look for a job within 60 days; if you're on welfare; or if your report is inaccurate because of fraud, including identity theft.
• Request and receive a free copy of your credit report once every 12 months from each of the nationwide consumer reporting companies - Equifax, Experian, and TransUnion. The three companies have set up a central website (annualcreditreport.com), a toll-free telephone number (1-877-322-8228), and a mailing address (Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281) through which you can order your free annual report. If you opt to request a free copy of your credit report via mail then you will need to complete the Annual Credit Report Request Form, which can be printed from the FTC Web site.

Questions for Your Attorney

• I signed a contract with a credit repair company two days ago, what do I need to do to cancel the contract?
• I disputed an item on my credit report over 30 days ago and I have not received a response from the credit bureau and the item is still on my report. What should I do?

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