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Credit Repair Companies and Credit Repair Services...

The Federal Trade Commission warns consumers to be very careful when dealing with credit repair companies and credit repair services. Steve Baker, Director of the Federal Trade Commission's Midwest Region, has gone on record saying:

"The FTC is on record saying that we've never seen a legitimate credit repair company. I won't say there couldn't be one-if you actually had problems with someone else's information on your credit report and wanted to hire someone to help you go through the system and get rid of the incorrect information, presumably that could be done."

Before paying someone for credit repair, consider getting your own credit report from all 3 national credit reporting agencies and using the dispute process specified under law for correcting items in your report which are not accurate. For more information visit our webpage on how to Credit Report Disputes.

Credit Repair Services - Be Careful!

You see the ads in newspapers, on TV, and on the Internet. You hear them on the radio. You get fliers in the mail. You may even get calls from telemarketers offering credit repair services. They all make the same claims:

"Credit problems? No problem!"
" We can erase your bad credit—100% guaranteed."
"Create a new credit identity—legally."
" We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!"

Do yourself a favor and save some money too. Don't believe these statements. Only time, a conscientious effort, and a plan for repaying your debt will improve your credit report.

The Scam
Everyday, companies nationwide appeal to consumers with poor credit histories. They promise, for a fee, to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job. The truth is, they can't deliver. After you pay them hundreds or thousands of dollars in up-front fees, these companies do nothing to improve your credit report; many simply vanish with your money.

The Warning Signs
If you decide to respond to an offer for credit repair services, beware of companies that:

  • want you to pay for credit repair services before any services are provided;
  • do not tell you your legal rights and what you can do—yourself—for free;
  • recommend that you not contact a credit bureau directly;
  • suggest that you try to invent a "new" credit report by applying for an Employer Identification Number to use instead of your Social Security number
  • advise you to dispute all information in your credit report or take any action that seems illegal, such as creating a new credit identity. If you follow illegal advice and commit fraud, you may be subject to prosecution.

You could be charged and prosecuted for mail or wire fraud if you use the mail or telephone to apply for credit and provide false information. It's a federal crime to make false statements on a loan or credit application, to misrepresent your Social Security number, and to obtain an Employer Identification Numbers from the Internal Revenue Service under false pretenses.

The Credit Repair Organization Act

By law, credit repair organizations must give you a copy of the "Consumer Credit File Rights Under State and Federal Law" before you sign a contract. They also must give you a written contract that spells out your rights and obligations. Read these documents before signing the contract.

The law contains specific consumer protections. For example, a credit repair company cannot:

  • make false claims about their services;
  • charge you until they have completed the promised services; or
  • perform any services until they have your signature on a written contract and have completed a three-day waiting period. During this time, you can cancel the contract without paying any fees.

Your contract must specify:

  • the payment for services, including their total cost;
  • a detailed description of the services to be performed;
  • how long it will take to achieve the results;
  • any guarantees they offer; and
  • the company's name and business address

Learn more to dispute inaccurate items in your credit report