Watch Out for These Red Flags of a Credit Repair Scam and Avoid Companies That Display Them

There are a few red flags that can signal a scam when dealing with credit repair companies

How to Avoid Being Taken in by a Credit Repair Service Scam
Image: NCCC
February 5, 2019

A financial setback is devastating, especially to your credit rating. Repairing the damage to your credit can seem like an impossible task. During these times of anxiety, it can be easy to fall victim to scammers wanting to take your money with promises of repairing your credit history. Before you become a victim to a credit repair scam, look out for these red flags and avoid companies that display them.

Demanding payment upfront

Unscrupulous companies want you to pay before they provide a product or service so they can take off or deliver only part of the promise. The Credit Repair Organizations Act prohibits any credit repair organization from either requesting or receiving a payment until after they have completed the service they have promised. Some companies attempt to evade this requirement by structuring monthly payment plans, but it is still illegal to pay them before they have provided the service.

NEVER pay upfront for any credit repair services. If the company uses telemarketing, it is governed by the Telemarketing Sales Rule and can't request or receive any fees until it has provided a credit report to you that has been produced more than six months after the promised results. This helps to ensure that service you pay for is what you actually got.

It's too good to be true

It doesn't matter who you are dealing with. If it sounds too good to be true, it is too good to be true. Unfortunately, we ignore this simple rule when we're desperate for a quick fix.

Some companies will tell you that they can erase or otherwise eliminate all negative credit information from your credit report in a short period of time, even if that information is correct and up-to-date. They may also promise an increase of a particular amount in your credit score or guarantee a specific result. No one is able to guarantee these types of things. Credit repair takes time, and sometimes considerable time.

Unable to answer questions

Is the company representative able to explain the specific details of the services you are being offered? How about the total cost of those services? How about providing a physical address that you can look up later? If they are not able to do so, you are likely dealing with an unscrupulous company. Legitimate companies will answer all questions to the fullest extent possible and will have no problem telling you they can't do something or can't guarantee a result.

holding back or giving misleading information

The company should inform you what your rights are, including your right to get a written contract that outlines the details of your arrangement and your right to cancel your contract within three (3) business days. It should also disclose the full total cost of its services. It should not tell you that you should not (or cannot) contact any nationwide credit reporting company directly. You can.

Be wary of any company that seems to be holding back any information or gives you any information that you know is wrong or seems misleading.

Asking you to misrepresent

This is a big no no. Credit repair companies cannot suggest or request that you try to invent a "new" credit identity, which would result in a new credit report, by applying for an Employer Identification Number rather than your Social Security Number. Companies cannot advise you to tell white lies about certain things or otherwise misrepresent any facts.

Know Your Rights, Report Suspected Cons

If you think you have been scammed, file a complaint with the Consumer Financial Protection Bureau and the North Carolina Attorney General's Office.