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Spotting Credit Repair Scams

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Having a bad credit score can be very discouraging. While it can be tempting to want to believe a company that says it can repair your credit score quickly, the fact is, no firm can actually deliver on this promise. If you’re approached by a credit repair company, the State of Connecticut, Office of the Attorney General recommends contacting your local Better Business Bureau, your state or local consumer affairs agency, and your state Attorney General to verify that the business is legitimate and no complaints have been filed against it.

Signs of a Credit Repair Scam

The Federal Trade Commission advises you to watch out for the following warning signs of a credit repair scam:

  • Requesting Upfront Payment: The FTC states that, under the Credit Repair Organizations Act, a credit repair company cannot make you pay until it has completed all guaranteed services. If a company tries to get you to make a payment before it has actually taken any steps to repair your credit, take this as a major red flag that it is trying to scam you.
  • Asking You Not to Contact Credit Bureaus: Regardless of the reasons given to support this request, if the company asks you not to directly contact the three major credit bureaus — Equifax, Experian and TransUnion — it is trying to take advantage of you.
  • Advising You to Dispute Everything: If the company tells you to dispute every charge on your credit report, this is a clear sign of dishonesty. You’re aware that you need to dispute any incorrect charges, but if you know certain charges are indeed accurate, then it’s illegal — not to mention dishonest — to dispute them.
  • Telling You to Provide False Information: Any company that would tell you to provide false information on a loan request is definitely a credit repair scam. A legitimate business would never advise you to give false information on anything, ever.
  • No Mention of Legal Rights: A company that doesn’t advise you of your legal rights in its sales pitch doesn’t have your best interests in mind. Legitimate companies want their customers to be fully aware of their rights before agreeing to work with them, so if this business doesn’t explain the terms of the agreement to you, it's trying to hide something.
  • Offering to Change or Erase Information: If the company tells you it can change or erase negative information from your credit report, this is a lie, as no one has the power to do this.
  • Suggesting that You Create a New Credit Identity: Credit repair companies trying to scam you may suggest creating a new credit identity, thus generating a new credit report, by applying for an Employer Identification Number (EIN) instead of a Social Security number. This is not legal and a legitimate company would never advise you to do this.

If you’re afraid you’ve already been victimized by a credit repair scam, the FTC advises you to report it to your local or state law enforcement officials, as many states have laws in place regarding credit repair companies.