Bad Credit Resource Center

There are a number of credit repair scams around.  These scams usually promise to improve your bad credit situation, when in reality the “experts” offering these services will either overcharge you, actually put you in a worse financial situation, or involve you in illegal activity.  Here are some common scams to be aware of:

1) Credit repair companies that tell you to lie on loan applications or suggest that you develop a second identity.  This is illegal and dishonest. If a company suggests that you open accounts in a new name or falsify your information on loan applications, you better get away. 

You can be charged with fraud for doing this - and you’ll be held responsible for your actions, even if you were acting under the company’s advice. 

2) Credit repair companies that promise to pay your creditors from money you pay to them and which they keep in an escrow account.

Here’s how it works: the debtor gives money to the credit repair company, presumably for paying off debts.  The company places the money in an escrow account where it grows.  The idea is that the company will eventually pay off your debts when the amount reached in the account matches the debts.  The problem is that in the meantime, the credit repair company is removing some money from the account for administrative fees while creditors are becoming more and more anxious, increasing the interest on the debts and even starting legal action against the debtor.  This type of “credit help” actually ruins your credit rating!

3) Credit repair companies that ask for money up front, charge you fees or hidden fees for things you could do for free yourself - such as working out a budget or getting copies of your own credit reports and fixing the errors.

4) Credit repair companies that pressure you, don’t listen to you, or want you to sign a contract you have not read. These companies should not to be trusted.

5) Companies that don’t tell you your rights. 

If a company doesn’t advise you of your credit rights, that’s an indication that they are not really on your side. Why would you want to do business with a company that does not help you?

6) Companies that offer you fast or instant credit repair - no matter how bad your credit.  This is a misleading a claim that no company can legitimately deliver on.  If you have very bad credit, it may take years to fully repair. 

In many cases, these companies will claim that they can improve your poor credit history from your credit report by disputing it.  This is false information. You simply cannot remove true and accurate information from your credit report.  It is true that a credit bureau must investigate a claim of inaccurate information within thirty days, but this does not mean that the company will automatically remove the information. 

In fact, if the information is accurate, the data will stand.  Credit bureaus are aware of this common credit repair scheme and have become very good at detecting it.  Many credit repair companies (and even some individuals) will try to dispute every ding on a credit report, hoping that the backlog of disputes will cause the credit bureau to automatically remove the offending items from the report (the credit bureau is legally required to remove disputed items it has not investigated within 30 days). This technique is a scam and is dishonest since you’re not disputing inaccurate information. 

Don’t do business with credit repair companies that use this practice.

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