Avoid credit repair fraud. These companies promise to fix your credit often for an exorbitant fee that can run into thousands of dollars. Remember, a credit repair company cannot do anything more than you can do yourself through patience, persistence and knowledge. And you can do it for far less than it will cost with a credit repair company.
Most credit repair companies often disguise themselves as a legitimate financial-aid company, debt counseling service, loan consolidation company, or credit-fix-it company. Look for certain warning signs when you investigate one of these companies.
These include such impossible claims and false promises in the company’s advertising, as no credit is beyond repair, eliminate all negative reporting including bankruptcies, or we can get you unlimited credit now, no matter how poor your credit history.
Also be wary of credit repair fraud if the company claims it can get you a major bank card even if you have poor or no credit.
Credit repair companies use many techniques to draw clients: from court reported bankruptcies and telemarketing to direct mail advertising. Once they contact you, they often prey upon your fears with these lies and deceptions:
Avoid fraud because many companies claim they are affiliated with the federal government. In truth, beyond passing laws to protect consumers from unfair credit practices, the federal government is in no way connected with any aspect of credit repair.
They may tell you that file segregation is a legal credit repair technique. But file segregation is an illegal technique used by some companies to create a separate identity for a client. This is a federal crime that may also involve mail or wire fraud. You may also be sued for civil fraud.
They may also trade on your fear that bankruptcy destroys your ability to obtain credit for ten years. This also is not true. Most creditors consider bankruptcy case by case, and take into account the reason for the bankruptcy, and whether it was due to circumstances beyond your control, such as illness or job loss.
The misrepresentations by credit repair companies are designed to panic you into seeking their help. The more desperate you view your situation, the more you will believe their extravagant claims.
Some states have laws that regulate credit repair companies These states usually require credit repair companies to be bonded (or have insurance to cover up-front deposits in case they are sued by clients), abide by the FCRA, inform clients of their legal rights, provide clients with a written contract and allow clients 3 to 5 days to change their mind after they sign a contract.
Fifteen states that regulate credit repair companies are:
Arkansas, Louisiana, Oklahoma, California, Maryland, Texas, Connecticut, Massachusetts, Utah, Florida, Nevada, Virginia, Georgia, New York and Washington
Disguised as a debt consolidation company, the credit repair company also may offer you a very high interest loan with large up-front fees, possibly secured with your home as collateral. Also disguised as a debt counseling service may be a bankruptcy attorney using the service as a front to attract clients.
Another firm may offer you a national bank card which is only a secured bank card easily obtained yourself without having to pay an additional fee to the credit repair firm.
What should you do if you do decide to work with a credit repair firm? First, contact the Federal Trade Commission, Better Business Bureau, state’s attorney general or the Department of Consumer Affairs to see if complaints have been filed, or legal action taken against the company. Second, meet personally with a representative of the company.
You can visit the Better Business Bureau's website www.BBB.org and find reports on hundreds of companies.
To avoid credit repair fraud have the company tell you what it can and cannot do for you and get it in writing. Finally, do not under any circumstances give the company money in advance.
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Disclosure: I am an independent Credit Repair Cloud™ Affiliate, not an employee. I receive referral payments from Credit Repair Cloud. The opinions expressed here are my own and are not official statements of Credit Repair Cloud.