5 Signs a Credit Repair Specialist is a Scam
Simply calling or clicking a link online to a credit counseling or credit repair company should put you one step closer to putting your financial problems behind you. But be cautious. I've been in the credit repair business for a long time. And I've seen it time and time again. The truth is that many credit repair services make promises they are unable to keep. Alternatively, what they are doing for you may be working against your chances of repairing your credit.
This may sound strange and possibly unbelievable, but it is the case for the majority of credit repair companies, and you must be aware of these 5 warning signs before hiring or paying any credit repair service for assistance.
5 Signs a Credit Repair Specialist is a Scam.
1. They claim to be able to improve your credit score by 100 points or more in 30 days or less.
According to the Federal Trade Commission (FTC), this is a clear red flag. If a company promises quick results, there's a good chance it's a scam and won't deliver, or it'll charge you exorbitant fees for services you can do yourself for free. It's highly unlikely that they could raise your score by so much in such a short period. Even if it were possible, it would be prohibited by the Credit Repair Organizations Act (CROA), which states that no company can guarantee results for their customers.
The truth is that there is no way to instantly raise your credit score by 100 points or more. The only way this could happen is if your scores were artificially low due to something like a reporting error. Raising scores by that much in that amount of time would be impossible otherwise. Even if the company corrects a mistake on your report, it will not have an immediate impact on your scores unless the incorrect data was significantly lowering them.
2. They promise to remove accurate negative information.
Not only is this unethical, but it's also illegal. Accurate negative information cannot be removed, no matter how much you pay for credit repair services. This means if you have legitimate late payments or unpaid debts on your report and the credit repair specialist promises to remove them, they are simply lying to you from the get-go. There's no way around it — accurate negative information must stay on your report for seven years (insolvencies such as bankruptcies are required to remain on reports for 10 years).
If you have accurate negative information on your report, it will not be removed. The only exception to this rule is if there is an error. For example, if you are being reported for late payment when you were on time, then it may be possible to dispute the item. If a company is making this kind of promise, it's a scam.
3. They want you to pay upfront.
It's not uncommon for a company to demand payment in advance for services rendered. It is, however, illegal for a credit repair company to demand payment before any services are rendered. According to the law, you must see results before paying any fees. Be wary of any company that demands payment in advance.
Credit repair companies are not allowed to charge you until they have completed service, according to the Credit Repair Organizations Act (CROA).
A legitimate credit repair specialist should never request payment in advance, and if they do, it indicates that they don't know what they're doing.
4. They claim to be able to create a new credit identity for you.
Some credit repair companies will try to persuade you that they can create a new identity for you from the ground up, but this is nearly impossible. The only way to do it would be to create a completely new identity — which is rarely possible because most people will have their information on file with the major credit bureaus by the time you need it. They claim that they can provide you with a new Social Security number, which many states will allow in certain circumstances, but this is still an illegal method of avoiding the fact that your name is on file with the federal government.
They claim to be able to get you on the radar of banks so that they will not report you're bad debt to them, as well as have charges removed from your accounts such as late fees or over-the-limit fees. That is a Scam right there!
5. Their contract is hard to understand. A reputable company will give you a clear and specific contract that details exactly what they will do for you, what it will cost, and how long it will take. Any company that dodges the question or tries to muddle the issue should be avoided.
Companies that advertise free consultations but end up charging hidden fees violate the federal Credit Repair Organizations Act (CROA) and should be avoided at all costs.
How to know a Credit repair agency is reliable?
Credit repair is a thriving industry. If your credit score has suffered as a result of late payment, bankruptcy, or other factors, some companies can assist you in restoring it. And, while this may seem like a good idea before you hire someone to work on your credit, do some research to ensure the company has a good reputation in the industry.
Here are some questions to consider:
· Is the firm/specialist experienced? Credit repair companies usually have a well-established staff; if they don't have any experience, they won't be able to help you improve your credit score and may even harm it.
· Are they genuine? Credit repair companies are not regulated by any government agency, so their legitimacy cannot be established. If you're going to hire someone from the internet, you should know who you're hiring.
· Can I speak with previous clients? If a company is dependable, it will usually have some online testimonials about its work. If there isn't a track record of success with credit repair companies online, don't hire them.
Always check with your state's attorney general's office, the Federal Trade Commission, and local consumer organizations such as the Better Business Bureau to see if there have been any complaints.
