Credit repair scams

How do credit repair companies lure consumers?

“Credit problems? No problem!”

“Create a new credit identity – legally.”

Does this seem familiar to you? How often have you been inundated with such offers and how often have you been tempted to turn over your piling debts to a company offering such a solution? But hey! Before taking up the offer, check that it is genuine. Avoid becoming a scam statistic in your desire to flatten that mound of piling debts and be completely free of them.

Everyday, you see numerous similar advertisements in the newspaper, Internet and TV, advertising a credit repair company’s ability to clean up bad credit reports overnight. Or every time you tune into your favorite radio station, you can listen to another such advertisement. Sometimes these companies email you and even call you on the telephone making big promises.

With an increasing number of people filing for bankruptcy, the business of credit repair is thriving. If you are being taken in by such blatant advertising in the hope of a quick fix to your problems and becoming solvent, then you are a ripe target for scammers.

Advance fee loan scams

Credit repair companies promise to get the consumer a credit card or a loan despite bad credit. They “guarantee” the loan, credit card et al in return for the advance-fee. Their targets are consumers like you with no credit history or a very bad credit and needing a mortgage loan or a card in a hurry. They will approach you either via telephone or mail. And in exchange for the services, you have to pay them exorbitant advance-fee. Though the offer may seem extremely good and a solution to all your debts problems, don’t follow them up without checking with your local Consumer Protection Agency, as they may not be genuine.

FTC warns consumers that a genuine creditor will never “guarantee” positive results. Though genuine creditors may also approach consumers via telephone or mail, they will not promise that you will get the loan or ask for advance fee. The only fees that you have to pay legitimate creditors are appraisal fees or application fees.

How to recognize these scams?

One common feature of the ads for advance-fee loans is the number of “900”. When you call these numbers, you find that you are presented with a hefty telephone bill. Also, these companies use private means of delivery like courier services.

If the service offered is genuine, the creditor or bank will ask for your identification and credit report only after you accept the offer in writing or verbally. They will warn you that the offer is valid only if your credit report meets their standards. You will not be required to pay any advance fees.

Advice To consumers

Have you wondered how it is possible to consolidate and pay off your debts or become debt free and avoid foreclosures et al without borrowing? If you are being guaranteed freedom from all debts so easily, be on your guard. Their solution may be to file for bankruptcy, which causes a long-term damage to the credit report. It will stay there for 10 years, glaring up at you every time you apply for a job, new credit or apartment. It will make prospective employers and landlords take a step back and view your creditworthiness in a different light. You can almost hear them sighing and mentally shaking their heads regretfully because the credit report says it all about you - that you are not a financially responsible person.

Don’t Be Fooled

Remember a few things if you get a call from a telemarketer guaranteeing a loan or new credit, if you pay advance fees.

A genuine creditor will not ask for advance fees though you will have to pay a fee for the application or for the appraisal of your report.
He will inform you of your legal rights, one of which is that you can contact the reporting company yourself and repair the report.
If the offer is for creating a new identity, it can only be a scam. You will need an Employer Identification Number to create a new identity and when you use this number instead of the Social Security Number, you are misrepresenting yourself and committing fraud.
If you are advised that disputing all the negative information in your credit report will help you, then remember that challenging accurate negative information will not endear you with the credit bureaus.

Help yourself

You are the only person who can clean up your credit report and remove negative information but it cannot happen overnight. You have to patiently build up positive credit. If there are genuine errors in your report, contact the reporting company and inform them of the error in your report and try to get it removed. Attaching documents in support of your claim will help the bureaus and the reporting company to verify the accuracy of your claim quickly.

Know Your Rights

A.) Credit Repair Organizations Act

Before entering into a written agreement with a credit repair organization, read the contract well and check that it contains all the details that have been specified under the Credit Repair Organizations Act.

The contract MUST contain the following details:

Name and address of the credit repair company.
As a consumer, you are entitled to get a Xerox of “Consumer Credit File Rights Under State & Federal Law”. The Credit Repair organization, with which you are entering into a contract, has to provide you with this before the contract is finalized.
The contract must enumerate your rights clearly.
It must clearly state the services to be provided and the total cost that will be charged for the services they are providing.
The verbal guarantees that are made should be stated in writing.

Apart from the above, the contract must NOT contain the following clauses:

Ask for advance-fees before completing the services promised.
Make promises that they cannot keep.
Provide you with services before you sign the contract. After signing the contract, there is a 3-day waiting period within which you can change your mind and back out of the agreement. The credit repair organization cannot provide you with any services before this 3-day waiting period is over.

If there are any terms, conditions or clauses that you do not understand, hire a lawyer specializing in credit to help you. He will guide you properly. This way you can avoid signing away the rights that you have been given under the Federal law.

B.) Federal Telemarketing Sales Rule

Under the Federal Telemarketing Sales Rule, a telemarketer or creditor is not permitted to collect or ask for advance fees for guaranteeing or promising the loan until he delivers on his promise. It is illegal and subject to action by the government.

Are you a credit repair scam victim?

If despite taking all the precautions, you still become a victim of a credit repair scam, you must contact the consumer protection agency, Better Business Bureau or the Attorney General of your state and lodge a written complaint.