How to avoid credit repair scams?

Credit is something that’s very important for everyone. Having bad credit can be a great blow to one’s personal finance. Taking care of your credit is something that you should be aware of most of the time. There are some actions that could have a negative impact on your credit and you should be aware of those actions so you can avoid them. You should be aware of how to take care of your credit right from the start.

But what if you get a bad credit? After the recent financial crisis many households are still struggling to get their finances in order. Some consumers might have bad credit through no fault of their own. Sometimes getting a bad credit record is inevitable. What can you do then?

There are certain steps that you can take in order to repair your credit. Your situation is not hopeless but it is not going to be easy. You should also be aware that there are certain scams out there targeting consumers like you who are aiming to repair their credit. You have to be aware of what these scams are so you can stay away from them. Falling victim to one of these scams could only make things worse for you.

New Credit Identity Scams

One of the most common credit repair scams out there is to use a new identity in order to get you credit. Credit repair companies that do this sort of scam would offer to give a new social security number. That way, your old credit history with the bad information is not going to be identified with you. This is a dangerous step because using a social security number other than your own is illegal. You could face a term in prison if you are caught doing that. That’s how seriously illegal that is. You should never agree to such a step and not have anything to do with a company that would offer that move.

Some of these companies use stolen social security and sell that. These social security numbers are taken from children so there is no credit history attached to it yet. Other companies that promise a new credit identity will give you a new number. They might call it as a credit profile number or CPN. It would look like a social since it is also a nine digit number. Other companies would tell you to get an EIN or an Employee identification Number. This EIN is a legitimate number used by the IRS, but it is not meant for getting credit. After getting these numbers for you, these credit repair companies might then tell you to get credit using those numbers, instead of your social.

Again using a social other than your own for transactions is illegal. Do not listen to what these companies would tell you because you could end up with more trouble if you try to use someone else’s social security number. You do not want to end up having legal trouble instead of just having personal financial problems. It is illegal to lie when you are applying for a loan or credit. It is also a crime to get an EIN under false pretence, so don’t just do what the credit repair companies would tell you.

Using Dispute Claims

Other unscrupulous credit repair companies might use other tactics that might not be illegal but are unethical and which could still cause trouble for you in the long run. One example of this is the way they take advantage of how credit reporting works. When an entry in a credit report is disputed, the entry would be removed from the report while the dispute is being processed. That would normally last for 30 days. That is what some credit repair companies take advantage of. They would flood the credit bureaus with disputes, even for entries that are legitimate. That would give enough time for the consumer to get a new credit card or obtain a loan. As mentioned, this practice is not really illegal and it only takes advantage of a feature of the way that credit reporting works, but it is very unethical and you could still end up in trouble because of it.

Do Nothing Scams

An even more common type of scam is the do-nothing scam of credit repair companies. The companies will promise a great deal of positive results and fast action. But after taking in payments from consumers the company will actually do nothing. The trusting consumer will be led to believe something is being done about his bad credit, but in reality nothing is happening. Finally when the consumer becomes fed up with the situation he will try to confront the company or ask for a refund but by then the firm has disappeared. Only then will it become obvious that it was all just a scam.

How to Avoid Credit Repair Scams

The best way to avoid credit repair scams is to stay away from companies that promise to aid you when it comes to getting your credit in order. In reality, even the legitimate credit repair companies cannot do anything that you cannot do on your own. But when you have decided that the services of these companies could benefit you, the best thing for you is to know your rights. When you are aware of your rights then you would know when a credit repair company is trying to pull off a scam.

Credit repair companies are governed by what is known as the Credit Repair Organizations Act. This law requires that a credit repair company should fulfil certain obligations to you first. It would be useful to know what this law states before you try the service of a credit repair company.

Signs of Scams

There are many credit repair companies that out there to scam people like you. It would help you out to know some of the signs that you should be on the lookout for. One sign that a company is out to scam you is the fact that they do not want you to know your rights as a consumer under the law. They are required to give you a copy of the Consumer Credit File Rights Under State and Federal Law which would tell you what your rights are. When they do not give you a copy of that, you should be worried already.

Another warning sign is that you are not given a copy of the contract that you have with them. Getting a copy of the contract is also your right. Sometimes the contract that the companies provide does not have enough information. If the contract does not state the information about the services that you will be getting, how much you will be charged, the name of the company, the date by which the services are supposed to be performed and a statement stating that you can cancel the services then you should demand more. One common practice of credit repair companies that are out to scam consumers is to ask payment even before they have done anything. You should never agree to this and if they insist then you should not get the services of that company.

When a company asks you to waive your rights under the law by signing the document then you should be worried. If they are asking you to waive your rights then that just means that they are planning on doing something that might violate those rights.

Some companies will also offer to have accurate information on your credit report to be removed. But that is never a good thing. If you know that information on your credit report is accurate no matter how negative it is then you should just live with that. Trying the services of credit repair companies could only result in more problems in the future. We have discussed companies using new credit identities. Any company that would offer that to you is a scammer and you should not have anything to do with them at all.

If You Have Been Scammed

Have you been scammed by a credit repair company? If you have become a victim then don’t just let them get away with that. You should do something about it. You should report the company immediately so that appropriate actions can be taken. You can send complaints to the FTC or the Better Business Bureau.

It has been mentioned already that there is nothing that legitimate credit repair companies can do which you cannot perform on your own. You need not get their services at all. Why pay someone to do something that you can do on your own. Doing your own credit repair is also a lot better because you can focus on it and be sure that some action is being taken instead of just waiting for someone to help you out. You just have to arm yourself with enough information that can set you on the right path.


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