You've probably seen ads for companies that claim they can repair your credit. Sounds great, right? Who wouldn't pay a few hundred dollars in exchange for a better credit score? Resist the temptation to believe in easy fixes. If it sounds too good to be trueâ€¦well, you know the adage.
Most of these companies are scams, preying on people in vulnerable positions. Many claim to be non-profit, with the implication that they're here to help you, but a tax category does not a social service make. Credit repair companies are not selflessly working to help people like you; quite the opposite. Although there are some legitimate companies out there, they are few and far between. In fact, these companies have become such a problem that Congress passed the Credit Repair Organizations Act to help vulnerable consumers. The purpose of the law is, in the words of the act, "to protect the public from unfair or deceptive advertising and business practices." Guess what these companies are notorious for?
There is no legal way to stop negative information from appearing in your credit report for seven years. A company that tells you they canÂ make information vanish from your reportÂ is lying, so you should immediately take that as a warning sign. Another important warning sign is if a company asks you for a large sum of money up-front. Think about it: if you call a plumber to repair a leak, do you pay him a large sum of money up front? Of course notâ€•you wait until he's done the work to your satisfaction. A legitimate credit repair company will not ask for money until after you're satisfied with their efforts and they will also probably not ask you for a lot of money. There are no quick-fixes here, so don't believe anybody promising a miracle.
That's not to say that a credit repair company can't fix your credit--for a while, anyway. These companies employ tricks like disputing negative information; by law, a disputed item will be removed from your report until it is investigated. Don't think that the company is going to remove it and then forget about it; they will investigate, receive confirmation from the creditor, and put it right back on your report. Another trick is telling clients to apply for new credit under a new Social Security number, perhaps one that is close to your real number so the credit bureau won't catch on. The illegality of this one should be obvious.
In sum, watch out for these warning signs that a credit repair company may be a scam:
- They tell you they can remove negative information from your credit score
- They try to loan you money
- They ask for a lot of money upfront
- They advise you to employ fraudulent means
- They share your information with other companies
If you watch out for these signs, you should be able to identify which companies are out to defraud you and which ones are more likely to help you. If you've already dealt with a company that has engaged in any of these practices,Â or which has done anything else you suspect is illegal or unethical, you canÂ help fellow consumers by reporting the company to the Federal Trade Commission.Â If you're in the market for one,Â chances are the benefits of a properly filed bankruptcy would far outweigh any benefit you might receive from a credit repair company. Bankruptcy will wipe the slate clean and allow you to rebuild your credit by putting you back in control. Serving North Carolina residents, the Law Offices of John T. Orcutt can help you get back on your financial feet. Call today for your free consultation: +1-919-646-2654.