How to recognize and avoid credit repair scams

You may have heard of credit repair companies claiming to improve your credit score in exchange for a hefty fee. These unscrupulous companies are ultimately taking advantage of people going through a credit crisis. Beware of this type of organizations as most of them are scams.

How to identify a fake credit repair company

Before taking help from a credit repair company, check its authenticity with the Better Business Bureau (BBB).

Some simple signs to identify a fake credit repair company:

  1. The company insists you to pay upfront fees before the work gets done
  2. It guarantees to raise your credit score
  3. It doesn’t inform your overall charges
  4. It makes lofty promises that it can’t keep
  5. It doesn’t disclose your legal rights while explaining its services
  6. It doesn’t provide you a copy of your contract before signing it
  7. The organization doesn’t notify you about the “3-day right to cancel the contract.”
  8. The company doesn’t tell you that you can get your credit report without its help
  9. It tells you to dispute accurate negative credit information in your credit report
  10. It won’t inform you about your right to dispute any information in your credit report
  11. The company restricts you from calling the credit reporting agencies directly
  12. It tells you to provide false information on your loan or credit application
  13. The company representative can’t answer your queries related to its services
  14. It tells you to apply for a new Employer Identification Number (EIN)
  15. It suggests you do all your financial activities using the new Social Security number (SSN) they’ll provide

What credit repair companies must do

According to the Credit Repair Organization Act (CROA) enforced by the Federal Trade Commission (FTC), credit repair companies must:

  1. Provide you a written contract explaining your legal rights and the details of their services
  2. Inform you about your right to cancel an agreement without charges within 3 business days
  3. Tell you how much time it’ll take to achieve the results
  4. Notify you the total amount you need to pay
  5. Explain their guarantees
  6. Not charge you upfront fees

Where to report a credit repair fraud

If you believe you’re dealing with a fraudulent credit repair company, you can take the following actions:

  1. File a complaint with the FTC
  2. Report the scam to the BBB or State’s Attorney General
  3. File a complaint online at ftc.gov/complaint
  4. Call 1-877-FTC-HELP

How to repair credit safely

One of the safest ways to improve credit score is, to do things on your own without the help of credit repair companies. How? Just keep reading:

  1. Check your credit report: You have the legal right to get a free copy of your credit report once a year. To grab a free copy of your credit report from the 3 credit bureaus – call 1-877-322-8228 or go to AnnualCreditReport.com.
  2. Dispute errors: Errors are common. Any incorrect financial information in your credit report will pull down your credit score. So, you should look for mistakes and dispute them to save your credit score from dropping.
  3. Create a personal repayment plan: With the help of a repayment plan, you can repair your credit score without spending a penny toward extra fees. You’ll also get ample credit repair tips online. Whatever you choose to do, try to stick to your repayment plan.
  4. Check your credit score: As of now, free credit reports does not contain free credit scores. However, you can visit sites like WisePiggy.com to get a free copy of your credit score. Ask your credit card issuers whether or not they’re offering free FICO scores to their customers.

Finally, the scammers target those individuals who’re not at all watchful. So, be alert and stay safe.

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