Don’t Get Caught in a Credit Repair Scam

Everyone wants a great credit score, but sometimes, those three little numbers need some help.  That’s where credit repair companies come in. These services can help identify and dispute errors on a credit report as well as work with consumers to help boost their scores. Unfortunately, though, not all credit repair companies are legit. In a credit repair scam, a fraudulent credit repair company targets consumers who have bad 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 of this scam:

  • The “credit repair company” asks you to pay for services, but gives nothing in return. 
  • 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 the crimes committed in your name. Some companies will even have the victim take illegal action on their own, such as creating false fraud statements 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 actively using them, such as children, seniors and prisoners. This is, of course, illegal and could land the victim in jail.

Protect yourself

Look out for these red flags in credit repair companies to avoid getting scammed:

  • Charges steep upfront fees. 
  • Promises to help consumers reach a specific credit score in a set timeline. 
  • Fails to mention you can dispute credit report errors at no charge. 
  • Suggests that you falsify information in any form.
  • Recommends that 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.
  • Offers to sell you a tradeline or authorized user account. 
  • Lack of an official contract outlining all terms and conditions. 

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 with reputable accreditation and a detailed contract that shows a clear plan for how it will repair your credit and its payment structure.  

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.