How to Spot a Credit Repair Scam

There are many companies out there that bill themselves as "credit repair services" who focus their attention on people with less-than-perfect credit who are desperate to find any kind of relief at all. They will promise you the moon in their ability to clean up their credit, and may even provide "testimonials" of people who have used their services and watched them achieve the impossible. Following are some of the techniques these scam artists use so you know what to look for.

• Claims to be able to remove all negative information from your credit report: This is the easiest and one of the most common claims used by fraudulent credit repair companies that you can use to spot them. According to federal law, negative information that is accurate cannot be removed from your credit report by anyone but the company that put it there, or if there is a dispute and the reporting company does not properly contest it, the credit reporting agency may remove it. If you are told that a credit repair company you are interested in can completely "wipe the slate clean" on your credit, beware.
• Charging upfront fees: Under the Credit Repair Organizations Act, it is illegal for credit counseling or repair companies to require upfront payment for their services until they have started what they promise.
• Suggesting a new identity: One of the newer scams on the book is trying to get you a new credit report altogether. You will be told that this is perfectly legal and is a "trick" that gets around legal loopholes, but don't fall for it. It is illegal to do anything with the intention of swapping out your old credit report or trying to get a new one.
• Dispute everything: If a credit repair company tells you to write to the credit reporting agencies and to dispute all of your debts - even the legitimate ones, you should beware.
• Appealing to Religion: Another recent fad by scam artists is to appeal to religion by claiming to be a religious company offering credit repair services. This is not to say that there are legitimate religious organizations out there providing these services, but that along with a few verses scattered on a web page should not be enough to convince you.
• Advising no payments: Some scam companies will advise you first to stop making any payments on any debts whatsoever, driving your credit score into the toilet just to increase their chances of being able to successfully negotiate with them on your behalf. You should not follow such shady advice or work with that type of company. The only time a legitimate credit repair company will tell you to stop paying on your debt is after a deal has been struck for a consolidation or negotiation that changes the terms, and that stop-payment will only be temporary.

If you join with a disreputable credit repair company and follow their poor advice, you will likely find yourself suffering the consequences for listing to their advice for committing fraud. It is illegal to misrepresent yourself on a credit application or loan, or to lie about your Social security number. Play it safe and go only with credit repair organizations you know you can trust through respected referral services such as Michigan Credit Repair. All it takes to get started are a few pieces of information. Now that you know some ways to avoid scams, you are ready to choose a credit counselor.