We’ve all seen the ads online. You know, the ones touting credit repair by companies who all but promise an increased credit score. You just need to sign up and pay a ‘small’ fee for their amazing service. They often sound sketchy and there are a percentage of them that, quite frankly, are sketchy. So what do you do if you want to improve your credit score? Here are the facts to help you avoid a credit repair scam.
First, do you need credit repair? The word repair implies that something is broken or that there are errors on your credit report. Is that the case, or do you just have a low score due to legitimate reporting of your financial activity?
Let’s assume that you have some errors on your report that are affecting your score. You need to take a look at what’s on your report, which you can find for free at annualcreditreport.com. Print out your report and read it carefully looking for anomalies and errors.
If you find an error, you can contact the three credit reporting bureaus directly to alert them to the issue and ask to have it removed or amended. Disputing errors in your credit reports is a free legal right available to you under the Fair Credit Reporting Act; you don’t need to pay a credit repair organization to do it for you. Here’s how to contact the credit bureaus:
Experian: https://www.experian.com/disputes/main.html
Transunion: https://www.transunion.com/credit-disputes/dispute-your-credit
Equifax: https://www.equifax.com/personal/credit-report-services/credit-dispute/
Credit Repair Companies
So far, you’ve taken the initiative to examine your credit report and it has cost you nothing. However, what if you’re busy and just want someone to help you. Here’s what you need to know before you commit to using a credit repair company. You’ll know a company is fraudulent if any of the following are true:
⋅ They insist on payment before they do any work, including an installment plan.
⋅ They promise a specific increase in your credit score.
⋅ They tell you not to contact the credit reporting companies yourself.
⋅ They ask you to dispute accurate information in your credit report.
⋅ They tell you to give misleading information on a loan application.
⋅ They don’t explain your legal rights when they tell you what they can do for you.
Read more: Understanding Your Credit Score and How to Improve it.
Beware of a “New Credit Identity” Promise
Any company that offers you a “new credit identity” should be avoided at all cost. These fraudsters will tell you, for a fee, that they can hide a bankruptcy on your credit report for example. They may provide you with a new social security number or a number that they call a CPN number. Sometimes they will tell you to apply for a business number or EIN (Employer Identification Number), but an EIN is not a substitute for your personal Social Security number.
Using a CPN, EIN or stolen social security number is a federal offense. Even if you unwittingly use a number that you falsely believe to be legitimate, you will be involved in fraud and/or identity theft. It is illegal to misrepresent your social security number, provide misinformation on a loan application, or obtain an EIN or CPN under false pretenses.
Knowing Your Rights
Legitimate credit repair companies are governed by the Credit Repair Organization Act (CROA) enforced by the Federal Trade Commission. This legislation makes it illegal for credit repair companies to lie about what they can do for you, and to charge you before they’ve performed their services. Credit repair companies are required to inform you of your rights, provide a written contract including costs (with a 3 day cooling-off period whereby you can cancel) and provide you with a time frame that the work will be completed.
What if you have been scammed?
Start by reporting the organization to your state attorney general. You can visit the National Association of Attorneys General’s website to find an Attorney General in your state. Send a complaint to the Federal Trade Commission, the Better Business Bureau, and the Consumer Financial Protection Bureau. You can also sue the fraudulent credit repair company in federal court for what you paid them, and seek punitive damages to punish the company for violating the law. A lawsuit won’t fix your credit, but you may be able to get back the money you paid for the services.
Read more: How to Build on Your Credit Score, the Right Way
How do I find a reputable credit counselor?
Most reputable credit counselors like Navicore Solutions offer services through local offices, online, or on the telephone. Regardless of the company you choose, check them out with your State Attorney General’s office, and local consumer protection agency. Before committing to a particular company, look them up on the Better Business Bureau to find out if there are any existing complaints.
Finally, ask the credit-counseling agency for information about the services they provide. They should be willing to send you free information without requiring you to provide any details about your situation. If a service doesn’t do that, consider it a red flag and go elsewhere for help.
Read more: Will Credit Counseling Lower my Credit Score?
A nonprofit credit-counseling agency will help you build a monthly budget that works and show you how to legally rebuild your credit score. Rebuilding your credit score will take time. There are no magic fixes, as some companies would have you believe.
Apart from reviewing your credit reports for errors, you should endeavor to make on-time payments on all of your current debt and strive to pay off your outstanding balances. Navicore Solutions can work with you to develop a financial plan that can help you manage your debt and improve your credit over time.
