It’s no surprise that many companies work under the guise of credit repair service in order to swindle money from clients. If you are struggling with bad credit and looking for a way out, the last thing you need is another financial drain. Keep these warning signs in mind before working with a credit repair company.
You are not informed of your rights. The Fair Credit Reporting Act (FCRA) is a federal law enacted to protect consumer rights and privacy regarding the information held by the consumer reporting agencies (TransUnion, Equifax, and Experian). It outlines your right to obtain a copy of your credit report, dispute inaccurate information, etc. Understanding your rights under this law is imperative to the credit repair process. As your advocate, a credit repair company must supply you with this information before signing a contract, and inform you that credit repair can be done on your own.
You are asked to waive your federal rights. The FCRA and Credit Repair Organizations Act (CROA) exist to protect your consumer rights and regulate the business practices of credit repair companies. Never sacrifice these safeguards to improve your credit.
You are asked to pay a fee before services are performed. You get what you pay for, and you shouldn’t pay for something you haven’t received. In fact, the CROA prohibits credit repair companies from accepting payment before completing their services. While credit repair is an ongoing process, make sure to verify the work done on your behalf before signing a check.
You are not given a contract. Verbal agreements rarely pass as evidence in court, so why should they pass within the realm of credit repair? Don’t take the credit repair company at their word: get a list of their services in writing before agreeing to work with them.
Your contract is incomplete. As Warning Sign 4 states, written agreements are vital to any business relationship. Review your contract carefully before signing, making sure that it contains the following elements:
The full name and address of the credit repair company
The amount you are being charged (both initially and monthly, if applicable)
Details of the services performed on your behalf
The time period required to perform the services, and times in which you will be notified of the progress made
A statement notifying you that your contract may be cancelled within three (3) days
The company promises to remove all negative information from your credit report, regardless of its merit. If a negative item on your credit report is justified, e.g., you are behind on your car payment, there is no way to legally remove the citation. A credit company promising impossible changes is not only practicing false advertising, they are asking you to lie about your financial history. Don’t fall for it.
You are asked to create a new identity. Many companies promise a “clean slate” by asking you to apply for an Employee Identification Number (EIN) from the IRS to replace your Social Security Number. The purpose is to apply for credit using a new identity. One word: fraud. The practice of hiding poor credit and creating a “clean” identity is known as Segregation, and is absolutely illegal. Repairing credit outside the parameters of federal law is never the solution.
Results are guaranteed. “Credit repair services” does not imply “credit repair results.” The most a credit advocate can promise you is honest and straightforward representation. The CROA requires them to acknowledge possible failure; any company that doesn’t is not telling you the whole truth.
Federal Trade Commission (FTC) endorsement. The FTC is an independent government agency that does not endorse any business. Their loyalty lies with consumer rights, not your credit repair company’s profit margin.
No Better Business Bureau (BBB) registration. Fraudulent companies don’t register with the BBB. Why? Because they do not want to be held accountable for their actions. The BBB allows consumers to file complaints against companies with shady practices. These dark spots can lower the company’s overall rating, ranging from A to F. Always check a credit repair company’s BBB rating before signing on. Review past and current complaints to get an idea of their customer service, response, and overall practices. *Note: Don’t fall victim to this loophole: make sure “credit repair” is listed as one of their services.
Lexington Law is a consumer advocacy law firm with 19 years of experience helping over 1/2 million Americans work to improve their credit. The firm empowers credit success through effective services, legal and fair billing practices, and accurate representation. Countless clients have been satisfied with our exemplary service; take a look at our credit repair testimonials to learn more about how we can help you.
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