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How to avoid credit repair scams

Written by Clint Turpen. Posted in Featured

Published on January 31, 2012 with No Comments

How to Avoid Credit Repair Scams 

If you’ve had some financial difficulties, a new year is a great time to start thinking about getting your credit back on track. A quick Internet search is all it takes to find out that there are hundreds of companies offering to help you rebuild your credit. However, it’s important to know that not all companies are offering legitimate services, and some could even land you in legal trouble. Here are some things to think about before you decide to use any credit counseling agency. 

How Do They Advertise? 

As with nearly everything else in the known universe, an unsolicited email message about credit repair is a sign of a probable scam. 

Similarly, an unsolicited phone call is a bad sign, and I wouldn’t be too quick to trust anything that showed up unbidden in the postal mail, either.

Finally, late night or daytime television advertisements can indicate shadiness, though there are legitimate agencies that use them. It is wise to locate an agency on your own, rather than trust advertising, however. Many credit unions have relationships with accredited (more on that later) credit counseling agencies and can point members in the right direction. 

Words That Indicate a Scam 

There are certain words you want to watch out for. Anyone offering to erase your credit history is breaking the law. Offers to remove accurate information from your credit report are a sign of illegal activity, and you can be personally accused of fraud if you attempt to do so. 

If a company tells you they’re going to file a dispute for every single item on your credit report, they’re about to rope you into participating in fraud with them. It’s illegal to file frivolous disputes in an attempt to get accurate information removed. The same goes for offers to help you apply for an Employer Identification Number with the IRS in order to create a separate credit profile. 

Finally, as with all financial matters, the words fast or easy are not to be trusted. Rebuilding your credit history is neither—it takes time, patience and discipline. Companies that claim otherwise are going to take your money and possibly get you in trouble, too. 

When Do They Want You to Pay? 

It is against the law for any credit counseling agency to ask you to pay for services up front. If they ask for payment first, you’re dealing with a disreputable company. Terminate contact immediately, and don’t give them any personal financial information. 

Do They Disclose Everything? 

A legitimate credit counselor is going to spell everything out for you. They’re going to tell you what the agency can do for you, how much their services cost, what your rights are as a consumer, and what you can do on your own for free (such as disputing inaccurate information on a credit report). They’ll give you all this information at the start, before you even decide whether or not to work with them. 

If they refuse to give you this information, or avoid your questions, it’s a warning sign. The costs should also be reasonable—many not-for-profit agencies charge very little (they also get paid by the creditors they work with). If they’re asking for several thousand dollars, walk away. 

Are They Accredited? 

Before you even initiate contact with a credit counseling agency, make sure it is accredited by the National Foundation for Credit Counseling (www.nfcc.org) or the Association of Independent Consumer Credit Counseling Agencies (www.aiccca.org). Also check the Better Business Bureau (www.bbb.org) and make sure they’ve got a good rating before you make contact. 

The start of a new year is a great time to set goals and make changes to improve your financial life, but always do your homework before acting. Never agree to a credit counseling offer just because they contacted you. Spend some time researching the company and check out alternative solutions before you act.

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About Clint Turpen

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All opinions, conclusions or recommendations expressed are solely those of the author and do not necessarily reflect the views of The Chronicle. Clint Turpen, marketing specialist at Regional Federal Credit Union, is a certified Identity Theft Risk Management Specialist. He is an author at Regional Federal Credit Union’s Fraud Prevention Unit Web site. For more information, visit www.fraudpreventionunit.org.

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