How to Protect Yourself from Credit Repair Scams

From those email and Facebook hackers to credit repair companies that call and promise to fix your credit, scams are everywhere.

Being scammed is a growing issue as consumers reported losing a record-breaking $5.8 billion to fraud in 2021 for a 70% year-over-year increase. The losses were mostly via impostors and crooks who stole money by posing as romantic interests, government employees, relatives in distress, or tech-support experts. Almost a million impostor scams were among the nearly 2.8 million frauds reported in 2021 to the FTC’s Consumer Sentinel Network.

But if you’re looking to repair your credit, these tips can prevent you from getting scammed and even teach you how to fix your credit yourself.

How to tell if a credit repair company is a scam

When in doubt follow the adage ‘if it’s too good to be true it probably is’ – especially if someone is promising to repair your credit.

If you’re getting bombarded by a credit repair company it’s important to recognize possible red flags such as getting unsolicited phone calls day and night or being pushed and prodded to pay money upfront to get its help.

Reputable credit repair companies won’t promise such things and are more realistic with what they can do in your situation and what they can deliver.

Does the company violate federal statutes?

If they violate federal protections, you’re probably dealing with a scammer. Legitimate credit repair companies are well aware of the requirements.

What is the Federal Credit Repair Organizations Act (FCRO)?

The Act or Title IV of the Consumer Credit Protection Act (also referred to as CROA) “prohibits untrue or misleading representations and requires certain affirmative disclosures in the offering or sale of “credit repair” services. The Act bars companies offering credit repair services from demanding advance payment requires that credit repair contracts be in writing and gives consumers certain contract cancellation rights.”

How to tell if a credit repair service violates CROA
  • Do they ask or want an upfront fee for the service being offered?
  • Are they promising to remove negative information on your credit report, even if it’s accurate?
  • Are they asking you to mislead or lie to credit reporting companies about your accounts?
  • Do they say not to call or make any contact with any credit reporting agencies on your own?
  • Do they suggest you use pretenses or develop a new credit identity to conceal credit problems or change your credit history?
  • Do they suggest you give lenders inaccurate information on credit or loan applications?
  • They won’t or can’t provide you with a written contract or any paperwork.
  • If you’ve already signed a contract with a credit repair outfit, with CROA you can cancel without charge within three days.

Be sure to investigate the credit repair service by searching the Consumer Financial Protection Bureau complaint database. Additionally, read reviews on the Better Business Bureau website to get a better idea about the company.

How to protect yourself from scammers

The best way to be ready for scammers is to know what legal rights you have as a consumer to fight back if you find yourself being a victim of a scam.

Several federal laws protect you from being scammed according to the Federal Trade Commission recommendations, as well as the CFPB recommendations.

For instance, it may seem like an obvious thing but never provide a Social Security number or other personal information to anyone you don’t know especially over the phone. The alleged scammer could sell your information and you could become the victim of identity theft.

If you’re suspicious, ask the person who is inquiring about your private information for an employer identification number or badge number and what company they represent, as well as any other transient info about the so-called company i.e., website, state it is based, etc.

Do credit repair companies work?

If you’re inclined and want to fix your credit you can often do it yourself without the intervention of a credit repair company and usually for free. Depending on your unique credit situation there are basic steps that can help your credit score.

Begin the process by obtaining a copy of your credit report and fixing the errors on your own by contacting one of the three credit bureaus – TransUnion, Equifax, or Experian.

You may obtain a copy of your credit report from any of the three major credit bureaus at Annualcreditreport.com. or via any of the bureaus. Federal law states the three largest CRAs must give each consumer a free credit report every 12 months if the consumer asks.

How to improve a bad credit score on your own

Sometimes, a bad credit score can happen to the best of us at any time. Maybe you had a medical emergency and couldn’t pay your bill in time or forget to pay your gas bill on the due date.

You may improve a bad credit score with some legwork with these tips or steps below.

Review your credit files

Again, you can begin the process by asking for free credit reports from one of the three major credit bureaus and begin by reviewing the report.

Dispute any inaccuracies

Look for things like:

  • Indications of late payment even though you paid on time
  • Hard inquiries you didn’t authorize
  • Accounts that you didn’t open
  • Loan balances that seem too large
  • Any other activity you don’t recognize or seems odd

To dispute an error it’s best to contact the credit reporting company and the company that provided the information and to get a fast conclusion.

Explain in writing what you think is incorrect, including the credit bureau’s dispute form, copies of documents supporting your dispute, and keep records of everything you send. If you send your dispute by mail, use the address on your credit report or a credit bureau’s address for disputes.

Negotiate payment arrangements

Call the company in question and discuss options with them and make a payment plan if possible.

Additionally, make any late credit card payments and tell the company you will do this as well.

Improve credit history

Payment history is important in determining your credit scores and having a long history of on-time payments results in excellent credit scores. Make sure you don’t miss loan or credit card payments by more than 29 days — payments at least 30 days late can be reported to the credit bureaus and damage credit scores.

Setting up automatic payments for the minimum amount due can help you avoid missing a payment. If you’re having trouble affording a bill, contact the credit card issuer and discuss hardship options.

Lower your credit utilization ratio

Try to keep this ratio low and don’t have credit cards with more than 60% individual utilization. Try to keep your entire credit profile under 30% and individual accounts. The lower your credit utilization, the higher your score will become.

Seek credit counseling

If you’re experiencing trouble with credit card debt, try a non-profit credit counselor to devise a payment plan. The counselor may be able to negotiate lower payments, interest rates, and ask card issuers to bring your accounts current.

Consider debt consolidation or debt settlement

Debt consolidation combines all your debts to make them easier to pay off; you’re only dealing with one payment and one interest rate versus multiple monthly bills and varying rates and fees.

While consolidation pays off debts in a full lump sum payment, a debt settlement means negotiating with creditors to lower the amount owed. You can do this by negotiating a settlement agreement with your creditor or working with a debt settlement company.

Be patient

Of course, having patience is important and most of us want to see our credit score change instantly especially if we want to buy a new car or a home. However, if it has to do with credit, you must be patient and wait it out until the score changes.

The bottom line

Having poor credit or anything less than good can be difficult as it can keep you from getting a mortgage, buying a new car, and/or not being able to qualify for a lease on an apartment or condo. However, before you even think about getting help from a so-called credit card repair company do try and improve your score on your own by the various methods listed above. You’ll feel better knowing you did it on your own and didn’t fall for a scam.

FAQs

Is credit repair a pyramid scheme?

Legitimate credit repair companies are not pyramid schemes. However, it’s important that you research any credit repair company before you hand over any money. Check Better Business Bureau reviews and complaints and search on the company’s name to seek out testimonials. If you can’t find much information on the company, or something seems too good to be true, find another company.

What is a 600 credit score? Is it considered good or bad?

Scores from 580 to 669 are considered fair; a 600 FICO score is below the average credit score.

What is a 609 dispute letter?

A 609 dispute letter is a request from a borrower to a creditor to remove negative information (even if it’s accurate) from your credit report. The name refers to section 609 of the Fair Credit Reporting Act (FCRA).
Use this sample letter to get an idea of what information needs to be included.

What should I do if I’ve been scammed?

Report issues and problems to the FTC, CFPB, state attorney general’s office, and local law enforcement. When you report a scam, the FTC can use the information to build cases against scammers, follow trends, educate the public, and share data about what is occurring in your community. If you were scammed, report it to the FTC at ReportFraud.ftc.gov.

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