How to Avoid These 4 Common Credit Repair Scams

When people are watching out for scams, they rarely are worried about places looking to help them repair their credit. Still, financial scam expert Steven Weisman thinks that they ought to be.

Weisman, of Scamicide, points out that a credit report dictates more than just whether you can get a loan and your interest rate.

“In many states, employers can look at these with regard to whether or not they want to hire you,” Weisman said, adding that they can also affect your ability to rent or even get insurance. “People get into trouble and want to see what they can do to fix it … some of what credit repair services will promise you is downright criminally fraudulent.”

He shared the biggest credit repair scams occurring today in hopes that you can avoid them.

Related: The Difference Between Investigative Consumer Reports and Credit Reports

Top Credit Repair Scams to Watch Out for in 2015

1. Using an SS-4

The SS-4 is an application form for an employer identification number. This is the number that businesses and trusts use in lieu of a Social Security number. This effectively creates a new credit identity, so a lot of credit repair agencies recommend that you fill out one of these forms.

Sounds good, right? The only problem is that its highly illegal. “It’s patently illegal to use an SS-4 to create a new credit report,” Weisman said. “It’s illegal for a company to suggest that you do it and illegal for you to use the number.” A serious crime, you should never fill out an SS-4 in the process of credit repair.

2. Paying for DIY Credit Repair

A common scam is credit repair services offering to do things for you that you can do easily on your own.

“Disputing charges, requesting an investigation or removing inaccurate or incomplete information is something anyone can do,” Weisman said. “You don’t need a credit repair service.”

Before you sign up for credit repair services, learn what you can do to repair your credit without one. Avoid any companies that try and get you to pay them for things you can do yourself for free.

Related: 7 Ways to Boost Your Credit Score This Month

3. Up-Front Costs

This one is more of a tell. Credit repair laws prevent credit repair services from charging you up-front costs.

“Under the Credit Repair Organizations Act, credit repair services can’t require you to pay them until after they’ve completed their services,” Weisman said.

He considers any request for payment up front to be a dead giveaway that you’re dealing with a scam.

4. Promising the Impossible

A lot of credit repair services will offer to do things that they just can’t do — and neither can anyone else.

“Negative information in your credit report doesn’t come off for seven years, regardless of how good you are unless it’s a mistake,” Weisman said. “Bankruptcies stay on for ten years. Anyone who says they can negotiate that out is lying to you.”

This is another huge red flag that you need to look for credit repair services elsewhere.

Other Credit Repair Red Flags

Any credit repair services you use should be up front with you about what your rights are, including having you sign forms saying that you received full disclosure of relevant laws. Further, you should read any contracts that they show you before you sign them. If anything sounds fishy, look into it before you sign up.

If you think that you’ve been scammed by credit repair services, it’s time to lawyer up, Weisman advised.

“If you have had your rights violated by a credit repair company, you can sue them in federal court and not only get your money back but also get punitive damages,” Weisman said.

Presumably you can then look for a more reputable credit repair agency than the last one you worked with.

Photo credit: Michael Theis

  • farmer76

    This information was super helpful. Glad to know there are some shady business practices out there, but also some legit services that can truly help the consumer repair their credit as well, places like Lexington Law etc…

    • d

      Lexington law is legi?

    • bear pupe

      Yup. Great advice. I have heard some really good things about Lexington Law and it is best to go with one that has a great reputation. Because at the end of the day. Nothing is more damaging to your financial health than having a bad report.

  • Dontbelievethehype

    Credit repair is 100% legal and anyone who tells you it is not is just fabricating a hoax. True you cannot remove items that are true and correct that is reporting against you. However you can remove all inaccurate information. Example: You filed a Chapter 7 Bankruptcy and a good number of the items you put in the bankruptcy are still reporting because the Trustee or the Attorney did not follow-through. Yes you can clear these items yourself but truth be told who has the time, you also can represent yourself in a court of law without paying an attorney. Should you? If you don’t have the time pay someone to do it – that’s licensed or bonded and follows the law. I can pull my on teeth but would I, no I would go to the dentist. So if credit repair works for you use it. But don’t get be swayed because someone wrote an article that probably has poor credit themselves and might need a little credit repair themselves.

    • Casey Bond

      If you take the time to read this article, you will see that the author never makes the claim that credit repair is illegal. The subject is fraudulent credit repair services that employ illegal practices. Just as donating to charity is perfectly legal, there are still plenty of fake or fraudulent charities out there — the same is true of credit repair organizations and consumers should take time to find a reputable service before paying for it.