Beware of Credit Repair Scams


You have heard many synonyms or phrases that mean the same thing in the realm of bad credit.  The terms credit repair, credit restoration or credit rehabilitation are completely synonymous. Those with bad credit histories cannot afford to ignore the potential benefits of credit repair.

In today’s economy, a strong FICO (Fair Isaac) score is more important than ever.  Approximately 78% of credit profiles in the United States contain some sort of error or omission materially impacting credit worthiness.  Absent self-help and the “do-it-yourself” approach, a consumer can hire a credit repair company in the restoration of their good name and reputation within the community.

Credit repair companies are governed by a federal law known as the Credit Repair Organizations Act.  This law requires a credit service organization fulfill certain obligations to a consumer.  You should avoid any credit repair service that fails to follow the following rules:

  1. You are not provided with a copy of the “Consumer Credit File Rights Under State and Federal Law” advising of your right to obtain a credit report directly from Equifax, Experian and Trans Union as well as “self-help” opportunities available under the law.
  2. You are not provided a copy of the service contract for review and contemplation prior to execution.
  3. The service contract does not contain the following information: (a) the amount being charged; (b) full details about the services to be performed; (c) the start and end date by which services will be performed; (d) the full name and business address of the credit repair company; (e) a statement advising that the service contract can be cancelled within three business days.

         You are requested to pre-pay before the credit repair services have actually been performed.

         The company promises to remove accurately reported information from your credit report.

         The company promises to create, or asks you to create, a “new” identity with a new social security number or federal employer identification number (EIN).

         You are requested to execute a document specifically waiving your rights under the Credit Repair Organizations Act (CROA).

If you are considering a credit repair service, keep in mind there is nothing legally they can do to improve your credit that you cannot do yourself.  Many of these companies promise or guarantee to remove harmful, but accurate, negative information from your credit report.  If the information is wrong or otherwise inaccurate, you have the right to dispute it yourself.  You only need to dispute the inaccurate entry to the credit reporting agency and/or creditor maintaining the record.  However, when the information is truly accurate, you do not have the right to dispute it, nor does a credit repair company.

Although you may not be prosecuted for disputing accurate information on your credit report, you can be prosecuted for fraud if you lie on a credit application.  For example, it is considered fraud to answer “no” that you have never filed bankruptcy when you actually have.  Just because you, or the credit repair company you hired, successfully removed the adverse bankruptcy entry from your credit report does not mean the bankruptcy never existed.

When the “do-it-yourself” approach is not feasible and you decide to hire a credit repair company to restore your good name and reputation within the community, be sure to check them out.  While the majority of credit repair clinics are scams, a few good ones do exist.  Consumers can check out a credit repair company through their state Attorney General at http://www.naag.org, the Federal Trade Commission at http://www.FTC.gov or through the Better Business Bureau at http://www.BBB.org.  In any event, do not allow a credit repair company to get away with scams.  Take action if your rights have been violated.  Report the offending company to your state attorney general, the Federal Trade Commission and the Better Business Bureau.

William E. Lewis Jr., is a credit repair expert with Credit Restoration Consultants and host of “The Credit Report with Bill Lewis” on AM 1470 WWNN, a daily forum for business and financial news, politics, economic trends, and cutting edge issues.

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