Credit Repair Scams

There are very specific rules and regulations that govern the "credit repair" industry. Nevertheless, newspapers, radio, TV, and the Internet are filled with ads for companies and services that promise to erase accurate negative information in your credit report in exchange for a fee. The scam artists who run these ads not only don't deliver — they can't deliver, because only information that is inaccurate, incomplete, or obsolete may be removed.

Federal law allows you to do this yourself, but most people do not know how to deal with the credit reporting bureaus or have the patience to follow through with them to ensure these derogatory statements are properly deleted. That's where a legitimate "credit correction" company can help. Your credit report can't be wiped clean or transformed by hocus-pocus, but you can significantly increase your credit score with a legal plan of action that includes an effort to repay your bills.

"Every day these scammers flood the newspapers, TV, the radio, and the Internet with their ads. Most likely you've  gotten their fliers in the mail, and may even have gotten calls from telemarketers offering bogus credit repair services as well. They all make the same claims:

Do yourself a favor and save some money, too. Don't believe these statements. They're just not true. Only time, a conscientious effort, and a plan for repaying your debt will improve your credit report.

The Warning Signs

If you should decide to respond to an offer to repair your credit, think twice. Don't do business with any company that:

• wants you to pay for credit repair services before any services are provided

• does not tell you your legal rights and what you can do yourself — for free

• recommends that you not contact a consumer reporting company directly

• suggests that you try to invent a "new" credit report by applying for an Employer Identification Number to use instead of your Social Security number

• advises you to dispute all information in your credit report or take any action that seems illegal, such as creating a new credit identity. If you follow illegal advice and commit fraud, you may be subject to prosecution.

You could be charged and prosecuted for mail or wire fraud if you use the mail or telephone to apply for credit and provide false information. It's a federal crime to make false statements on a loan or credit application, to misrepresent your Social Security number, and to obtain an Employer Identification Number from the Internal Revenue Service under false pretenses.

The Credit Repair Organizations Act

By law, credit repair organizations must give you a copy of the "Consumer Credit File Rights Under State and Federal Law" before you sign a contract. They also must give you a written contract that spells out your rights and obligations. Read these documents before signing the contract. The law contains specific consumer protections. For example, a credit repair company cannot:

• make false claims about their services

• charge you until they have completed the promised services

• perform any services until they have your signature on a written contract and have completed a three-day waiting period. During this time, you can cancel the contract without paying any fees.

Your contract must specify:

• the total cost of the services

• a detailed description of the services to be performed

• how long it will take to achieve the results

• any "guarantees" they offer

• the company's name and business address"

* Information above has been obtained from the Federal Trade Commission's website, the governing authority on "credit repair".

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