How To Spot Credit Repair Scams

The following are signs that a credit repair service might not be legtimate and honest

1.  "We guarantee results"

There was a federal law passed by Congress about a decade ago that forbids credit repair organizations from guaranteeing their results.  This means that no credit repair organization can guarantee you that they can remove a bankruptcy notation or any other negative information from your credit report.  Therefore, any organization that tries to convince you that they can positively get the results you want, watch out, because they're not only breaking federal law; they're also fibbing, since no one can guarantee specific results -- a doctor cannot guarantee you that your operation will be a success; an attorney cannot guarantee you that you will win your court case; and a credit repair service cannot guarantee you that they can clean up your credit report.

2.  A large lump sum payment is due upfront

There is a federal law that regulates credit repair organizations and this law forbids a credit repair clinic from accepting payment before work is done unless the organization is a registered non-profit or operated by an attorney or CPA.  Usually, the request for a large lump sum payment is a tip-off that you are being scammed.  Odds are that the credit repair clinic will take your money and run off and you'll never see it again.    A similar scam is the pay each month program where you pay a specific amount each month "until your credit is improved".  You can be sure the service is going to stretch out the process for as long as possible to collect as much as they possibly can from you -- you'll likely end up paying $800 or more.

3.  Credit repair services or websites are operated by Attorneys and CPAs

It has only been in the last decade or so have many attorneys and accountants realized that they can make some quick, easy money offering credit repair services.  Usually, their marketing literature will lead one to believe that they have specialized skills, training or knowledge to perform credit repair.  This is not true.  Of course, attorneys and CPAs would object to our characterization that they are operating a credit repair scam.  In any event, be aware that if you pay an attorney or CPA to do your credit repair work, he or she will spend about five minutes filling out some paperwork  (or an assistant will actually fill out the paperwork) and you will be billed hundreds of dollars for work you could easily and quickly do yourself. 

4.  "Our software can delete negative information from your credit report"

This is one of our favorite scams and one of the most outrageous claims around.  It's hard to believe the public actually falls for this.  The three big credit bureaus -- Experian, Equifax and Trans Union -- do not allow the public to access their computer databases and alter or delete information.

5.  "You can establish a new credit identity / new credit file"

You've probably received a few spam emails claiming that you can establish a new credit file.  This is not true.  If you ordered the information being sold to you in these spam emails, you would be told that you can establish a new credit identity by getting a nine-digit EIN (Employer Identification Number) from the IRS and using that in place of your social security number on loan applications and such.  The problem with doing this is that it is a felony to lie on a loan application you would be committing bank fraud which happens to be a felony.  If you used an EIN on a loan application and the bank discovered this (and there is a good chance that they will since they are aware of this scam and use a system to verify social security numbers) they can turn your loan application over to your local district attorney for prosecution.  You could go to jail for a few years for attempting to commit fraud.

6.  Credit repair websites originating from outside the USA or by amateurs

The Federal Trade Commission has jurisdiction over credit repair organizations located inside the USA. They are highly regulated and often prosecuted for cheating the public.  To get around the FTC's jurisdiction, many thieves are operating credit repair websites and selling credit repair information or services from outside the USA.  If you are cheated by one of these companies, there is nothing the FTC or your state attorney general's office can do to help you get your money back.  In addition, there are dozens of websites operated by entrepreneurs who have no expertise in credit repair and are merely reselling information most of which is of dubious value.

7.  "We can raise your credit score up to 250 points"

This is one of our favorite scams and one that most people fall for.  If you have bad credit, your credit score will go up with credit repair. The amount your credit score will rise is determined by how much good credit you have versus the amount of bad credit. No one can ever guarantee how high your score will go.

8.  "Free Credit Repair"

Buyer Beware!!! Nothing is free. Usually the larger Credit Repair firms advertise incognito offering free credit repair and usually offer you just enough information that you'll discover that you need to hire someone to do the credit repair for you. The FCRA says a Credit Repair company can charge a reasonable fee for their service and may not charge a "Per Deletion Fee", it is against the law.