What Are The Most Common Credit Repair Scams

Category: Finance, Credit.

Some credit repair companies make unbelievable offers to eliminate negative items from your credit report.

But most of them fail to deliver on thier promise and consumers end up losing their hard- earned money. They also claim that a better credit score will be reported in a short period. Even the Federal Trade Commission( FTC) is skeptical, stating there are very few legitimate credit repair companies. What are the most common credit repair scams? Therefore, it makes sense to try improving your credit score yourself rather than risking money on the services provided by credit repair organizations. The credit repair industry is riddled with scams and rip- offs. The scams that occur most often are detailed below: Temporary removal of negative items: Some credit repair companies claim they have an intimate relationship with the credit bureaus and have back- door through the system.

Most common are over- charging borrowers against false promises of providing a better credit rating. Meanwhile, they bombard the bureaus with disputes over the derogatory items and debts recorded in your credit report. However, to the surprise of most consumers, the original derogatory items and debts re- emerge after the next reporting cycle. These debts may disappear temporarily from your report once the bureau starts the investigation. The credit repair company charges a fee for the temporary removal of negative items from your report. Applying for a new credit report: Another credit repair rip- off involves a company soliciting a way to create a new clean credit report. Moreover, the charge is usually demanded upfront, which goes against the Credit Repair Organizations Act.

The company helps you apply for a new taxpayer's identification number or Employer Identification Number( also known as EIN) in order to build a new credit history. Ensuring a clean report: The biggest crooks are those credit repair companies who make you believe they can clean up your credit fast and help you get a mortgage or credit card through their channel partners. This does not follow a legal process and the new report ultimately will carry the previous information, despite having a separate identification number. They typically demand a lot of money upfront in exchange for such services. With all of the credit constraints returning in the mortgage complex, this is the most popular and most costly scam of all. In the end, these organizations are simply pretending to offer credit counseling or mortgage services and finally disappear.

How can you prevent becoming a victim? If you are still determined to seek outside council, please address the following items. To avoid the trap all- together, you can complete the credit repair yourself. Verify the legitimacy and experience of the credit repair company. Check with your state's regulatory and better business bureau to determine if the company is in good standing. This can usually be done by asking for referral sources of satisfied clients.

Have the company provide a contract outlining what services are to be rendered and the amount and method of payment. Beware when a company solicits you for services. Contact a trusted mortgage broker that is skilled in analyzing credit reports to determine if the suggested course of action is reasonable. Referrals are usually the best way to select a reputable service company. An executed contract is required to begin any repair services. Consumers have certain rights under The Credit Repair Organization Act.

You have three days to cancel the contract without paying any charge. If you feel you are a victim of a credit repair scam, you may report it to the local consumer affairs office or state Attorney General's office. It is prohibited for a credit repair company to charge you until the agreed upon services have been completed. A complaint may also be filed with the FTC that ensures the future protection of consumers against fraud.