Everyone wants a great credit score. An excellent score is the key to getting approved for low-rate auto loans, mortgages and more. But a credit score can sometimes need a little help. The numbers might need some minor tweaking, or they might actually be in troubling territory. Just one missed credit card payment can snowball into a huge debt that sometimes becomes too big to handle.
Here’s where credit repair companies come in. These services offer consumers help in boosting their score. They’ll find any errors in your credit file and help get negative reports removed.
They can also educate you on how credit works so you can make better decisions going forward and improve your ratings.
Unfortunately, though, not all credit repair companies are legitimate. In a credit repair scam, a fraudulent credit repair company targets consumers with poor credit. Let’s take a look at how these scams play out and how you can protect yourself from falling victim.
How these scams play out
There are several variations of the credit repair scam, and none of them end well. Here are the most common forms:
- The “credit repair company” asks you to pay for services, but won’t give you anything in return. While this will put you out some cash, it won’t impact your credit in a negative manner.
- The company takes illegal action to improve your credit score. This can involve filing a false police report or claiming identity theft. Of course, you will be held accountable for these crimes that are committed in your name. Some companies will even have the victim take illegal action on their own, such as creating a false fraud statement or lying about their credit history.
- The company directs the victim to set up a credit privacy number (CPN) or an employee identification number (EIN) to start building credit anew instead of using their Social Security number (SSN). Unfortunately, though, this number is likely someone else’s SSN. The companies poach these numbers from individuals who are not currently using them actively, such as children, seniors and prisoners. This is, of course, highly illegal and could land the victim in jail.
If you’re looking for ways to boost your credit, you may be targeted by any of the above credit repair scams or another variation. Look out for these red flags in credit repair companies to avoid getting scammed:
- Charges steep fees that must be paid upfront.
- Promises to help consumers reach a specific credit score within a predetermined timeline.
- Fails to mention that you can dispute credit report errors at no charge.
- Demands that the consumer falsify their information in any fashion.
- Recommends you set up a new identity through a CPN or EIN.
- Lack of proper accreditations, street address and positive business ratings.
- Refusal to work with your creditors and the credit report bureaus (Experian, Equifax and TransUnion).
- Offers to sell you a tradeline or authorized user account.
- Lack of an official contract with all terms and conditions of payment outlined.
If you do want to enlist the services of a credit repair company, look for a company that does not exhibit any of the above behaviors. You’ll also want to look for a company that has reputable accreditation and a detailed contract, which includes a clear plan for how they’ll repair your credit and their payment structure.
It’s also important to remember that you can do a lot of credit repair on your own. You can always dispute an error on your credit report and take steps toward increasing your score. Lower your credit utilization ratio, work toward paying off debt and be sure to make all credit card bill payments on time while maximizing your payments as much as possible. It’s also best to avoid opening new cards and lines of credit while you work towards boosting your score.
It’s always a good idea to try increasing your credit score, but don’t let scammy credit repair companies make things worse! Use this guide to avoid falling victim to a credit repair scam.