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 probably is.

The Federal Trade Commission ("FTC") is cracking down on credit repair websites that promise consumers they can restore their creditworthiness for a fee. Over 180 Web sites have been put on notice that their credit repair claims may violate state and federal laws. According to the FTC, many credit repair operations "guarantee" that they can remove negative information from consumers' credit reports, even if the negative information is accurate and timely. Tain't so.

The FTC has also identified over 60 credit repair operations that sell instructions on how to substitute a false social security number for your current number and create a new credit identity. Doing so would violate federal law.

"I'd like consumers to remember three things about credit repair," says Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "First, accurate and timely negative information cannot be removed from a credit report in an effort to repair it. Second, it's not only a bad idea to create a new credit identity using a false Social Security Number, it's also illegal. And third, when it comes to credit repair, only time and a personal debt repayment plan will improve your credit report."

The last thing you want to do is worsen your financial situation by choosing credit or debt repair "help" that wastes your time and puts you further behind on your debts.

If you decide to look into a credit repair offer, beware of the following warning signs offered by the 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 - for 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; or
• They advise you to dispute all information in your credit report or do something else that seems illegal.

Under the federal Credit Repair Organizations Act, credit repair companies can't require you to pay them until they've completed the services you contracted for. You also have the right to cancel your contract with a credit repair company within three days of the day you sign it.

Federal law also requires a credit repair company to provide you with information about your legal rights and what you can do to improve your credit rating yourself, including the following:

• You have the right to dispute inaccurate information in your credit report by contacting the credit bureau directly. There are specific procedures a credit reporting agency follows to determine the accuracy of credit report information, and the credit reporting agency must change or remove inaccurate or incomplete information.
• If the credit bureau's investigation doesn't resolve the dispute to your satisfaction, you can send a brief statement explaining your side of the story. The credit reporting bureau must include a summary of your statement with any report they issue about you.
• You have the right to obtain a copy of your credit report from a credit bureau. There's no charge if within the last 60 days you've been turned down for credit, employment, insurance, or as a tenant because of information in your credit report.
• You're also entitled to a free copy of your credit report if you're unemployed and intend to apply for employment in the next 60 days, if you're receiving public welfare assistance, or if you think there's inaccurate information in your credit report due to fraud.

Any contract you sign with a credit repair service 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

The reality is that no one can make accurate negative information disappear from your credit report. Only the passage of time - seven years for most information, 10 years for bankruptcy information- can accomplish that.

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