have the potential to damage your credit report as well as incur further
debt for you.
Your credit report is an important file that the credit bureaus store about
you as this credit report lets other lenders know whether you are
trustworthy or not.
Credit-repair companies run advertisements in newspapers, radio, TV, and the
Internet, offering you assistance, for a price, to clean up your credit
A lot of the claims that these companies make are false - such as being able
to remove judgments, liens and other unfavorable information from credit
They cannot remove legally accurate negative information from a credit
report. The legitimate help they claim to be able to provide can all be done
by you, for little or no cost.
Scammers prey on people with poor credit reports
because they are usually desperate to make their credit report better. The
scams however don't work.
One of their tactics is to challenge any debts on
your report which will cause it to be re-investigated. During this time it
may be removed temporarily and therefore show a 'clean' report, however as
soon as it has been verified, it is placed back on your file.
While the credit file has these entries temporarily removed during
investigation, the scammers show you a 'clean' report and demand their
money, before the entries are placed back on your report.
Red Flags of Credit Scams
The following red flags of credit scams are offered by the Federal Trade
You are asked to pay for credit repair services before any services
Under the Credit Repair Organizations Act, companies cannot require you
to pay until they have completed the promised services
You are advised not to contact a credit bureau directly
They suggest you apply for new taxpayer
identification or employer identification numbers from the Internal
Revenue Service so you can create a new identity
- You are not advised of your legal rights or what
you can do yourself to save money
- You are advised to dispute all the information on
your credit file
If you follow the illegal advice of one of these
companies and you commit fraud, you may be subject to prosecution.
The Facts Regarding Credit Scams
- No one can erase negative information on your file if it’s accurate. Only incorrect information can be removed. Accurate information stays on your record for 7 years from the time it’s reported [10 years for bankruptcy]
- Credit repair services can’t ask for payment until they’ve provided their services. Federal law requires credit repair services to give you a explanation of your legal rights, a detailed written contract, and three days to cancel [this applies to for-profit services, not to nonprofit organizations, banks and credit unions, or the creditors themselves]
- Be cautious about emails for credit services. Most unsolicited emails are fraudulent and are credit scams
- You can correct mistakes on your credit report yourself. If you were recently denied credit because of information in your credit report, you have the right to request a free copy. It doesn’t cost anything to question or dispute items in your report. Follow the instructions provided by the credit bureau. The major credit bureaus are: Equifax, 800- 685-1111, www.equifax.com; Experian, 800-682-7654, www.experian.com; and TransUnion, 800-916-8800, www.transunion.com. Contact all three, as the information each has may vary
- File segregation. This is an illegal scheme used by credit repair companies to encourage people with unfavorable credit histories to get new taxpayer identification or employer identification numbers from the Internal Revenue Service under false pretenses and use them to hide their true credit identity from creditors. File segregation is illegal, and if you use it, you are committing a felony
- You can add an explanation to your report. If there is a good reason why you weren’t able to pay bills on time such as job loss, sudden illness, or you refused to pay for something because of a legitimate dispute, give the credit bureau a short statement to include in your file
Steps to Repair Your Credit Rating and Avoiding
There are steps you can take to improve your credit
rating [and avoid credit scams] however its not always easy and won't happen
quickly [any claims of achieving it quickly are scams].
- Start is by getting the booklet "No Credit?" from the Office of the Data
- Order a copy of your credit file. The major credit bureaus are: Equifax, 800- 685-1111, www.equifax.com; Experian, 800-682-7654, www.experian.com; and TransUnion, 800-916-8800, www.transunion.com. Challenge any entries you think are wrong. Amendments can be made to a
file, removing incorrect information, or a note added to your file
stating why you believe it's incorrect
- Identify your debts and take steps to pay them. Many lenders will be happy to work out payment plans, and there are legitimate credit counseling agencies
- Consider bankruptcy only as a final resort, and then only after legal consultation
What to do for Credit Scams
- If you have credit problems, get counseling. Your local Consumer Credit Counseling Service [CCCS] can provide advice
about how to build a good credit record. The CCCS may also be able to make
payment plans with your creditors if you’ve fallen behind. These services
are offered for free or at a very low cost. To find the nearest CCCS office,
call toll-free, 800-388-2227, or go to www.nfcc.org.
Contact your local
consumer protection agency, state attorney general, or Better Business
Bureau. You can file a complaint with the Federal Trade Commission by
phoning the Consumer Response Center: Toll-free, 877-FTC-HELP
[382-4357]; or writing to: Consumer Response Center, Federal Trade
Commission, 600 Pennsylvania Ave., N.W., Washington, DC 20580; or you
can use the FTC email complaint form to complain about
No one can erase negative credit information if it is accurate and current,
and anything that is inaccurate can be corrected at little or no cost.
Federal law allows credit bureaus, which compile your credit history
information, to report all truthful information, including negative
information for seven years [bankruptcies can be reported for ten years],
and the credit repair companies cannot, and do not get the information
Everything a credit repair business can do for you legally, you can do for
yourself at little or no cost. You are entitled to a free copy of your
credit report if you've been denied credit, insurance or employment within
the last sixty days. If your application for credit, insurance, or
employment is denied because of information supplied by a credit bureau, the
company you applied to must provide you with that credit bureau's name,
address, and telephone number.
You can dispute mistakes or outdated items for free. Ask the credit
reporting agency for a dispute form or submit your dispute in writing, along
with any supporting documentation. Do not send them original documents.
Companies' promises to 'fix' your bad credit rating or to erase your bad
credit usually are nothing more than ways to take your money.