Avoiding Credit Repair Scams
If you have had bad credit, you may have been approached by companies offering to clean it up for you. However, most of these offers are scams. They will not improve your credit and may even close down or refuse to refund your money. You should avoid companies that ask for payment upfront, as this is a sign of scamming. You should focus on companies that focus on compliance with the FCRA and CFPB like Credit Compliance Advocates.
Common warning signs of credit repair scams
Some scammers claim to be able to remove delinquencies on your credit report in a matter of days. The problem is that it is impossible to remove all delinquencies from your credit report. These fraudulent companies often try to get you to give them your Social Security number or other personal information. This is an illegal practice and can get you into legal trouble. The good news is that there are many legitimate ways to fight against these scams.
First, make sure the company does not put pressure on you to pay up front. Federal and state laws prohibit credit repair companies from receiving payment before providing services. Some credit repair companies may also try to charge you monthly fees, which is illegal. This tactic may sound good, but is often a red flag for scammers.
Second, credit repair companies may encourage you to use your EIN instead of your SSN. They may also encourage you to dispute inaccurate information on your credit report. This is a federal crime, and you could be prosecuted if you concede to the company’s terms. It’s better to be safe than sorry.
Third, some credit repair companies may make false promises. For example, they may claim to be able to create a new credit report, which is illegal and may land you in prison. They may also tell you to obtain an EIN from the Internal Revenue Service – this is also illegal and may lead to your arrest.
Lastly, some scams may ask you to pay up front for their services before they complete their work. This is illegal under the federal Credit Repair Organizations Act, and you should never pay for services before they’re completed.
Illegality of credit repair companies
Under the CROA, a credit repair company cannot charge a client for services before they have performed them. Companies are also prohibited from offering an EIN in place of a Social Security Number (SSN). These practices are considered illegal. As a consumer, you should be aware of these legal violations and avoid engaging in business with a credit repair company that tries to take advantage of your situation.
It’s illegal for credit repair companies to suggest fraudulent practices like obtaining a new identity or using your Federal Tax Identification Number (EIN). Such practices are fraudulent and can lead to criminal prosecution. In addition, you can be charged with mail or wire fraud if you make a false statement on a credit application or credit report. The use of false employment identification numbers is also considered a federal crime.
A recent lawsuit filed by the Consumer Financial Protection Bureau alleges that RMCN Credit Services Inc., a McKinney, Texas-based credit repair firm, violated the Telemarketing Sales Rule and the Consumer Financial Protection Act by making false claims and collecting illegal up-front fees from consumers. The company has agreed to stop the illegal practices and will pay civil penalties.
Many credit repair companies use a section of the FCRA to benefit from people with bad credit. These companies engage in a fraudulent practice called “credit sweeps.” This is a practice that removes negative information from your credit report before the time limit stipulated by the FCRA. However, certain types of bankruptcy stay on a credit report for a decade or more.
Misrepresentations on credit applications
Credit repair scammers use deceptive tactics to obtain your money. One of the most common of these methods is enticing you to apply for a new identity. They will supply you with a fake nine-digit number that is similar to your Social Security number. They’ll call this number your “credit profile number” or “credit privacy number” and will encourage you to apply for credit using that identity. The problem with this method is that you will not know about any negative history associated with that number until you apply for credit.
Credit repair scams often target those who are desperate to fix their credit. This is particularly true of people who are unemployed, have experienced medical problems, or have been affected by a storm. In these circumstances, having negative marks on your credit report can make it difficult to qualify for a loan or buy a new car. Because of this, some organizations promise to improve your credit and take advantage of your desperate need for help.
If a credit repair company promises a fast turnaround, you must be wary. The FTC has an investigative tool known as the Consumer Sentinel Network that gathers data on credit repair companies. These tools help the FTC pursue cases involving these scams.
The best way to protect yourself from a scammer is to report it immediately. To do this, you can contact your state attorney general, the FTC, or the Consumer Financial Protection Bureau. You may also be able to file a lawsuit against a credit repair company in federal court if you think they’ve taken advantage of you.
Demanding upfront payment for credit repair services
Consumers should be cautious about companies that demand upfront payment for their credit repair services. This practice is against the law. It violates the CROA, which prohibits credit repair companies from asking for payment before they provide services. It is also illegal for companies to offer an EIN or SSN in place of a consumer’s SSN, or to require payment in advance without proof of a successful credit repair.
It’s not illegal to hire a professional credit repair company, but it is illegal for them to ask for payment upfront. Credit repair companies must provide a written contract that outlines their services and the terms of cancellation. Also, they cannot guarantee credit score improvements or credit report corrections. In addition, consumers must understand that they can’t receive a refund if their credit score isn’t improved.
Consumers should avoid companies that demand up-front payment and make wild promises. Legitimate credit repair companies will not require upfront payments and will only charge you once their services have been completed. Additionally, legitimate credit repair companies won’t make wild claims about your credit score. For example, they might claim to be able to remove negative information from your credit report, but this is not possible.
In addition to not asking for upfront payment, credit repair companies should provide their clients with a disclosure document explaining their guarantees and rights. The contract should also explain the cost of credit repair services. Finally, it should include the information about what services they will provide and how long it will take to see results.
If a company insists on paying up-front for their services, you can cancel the agreement within three business days. Many credit repair services offer a money-back guarantee, but you can’t always be sure that the company will remove all negative information from your credit report. It may be a good idea to find a free service that offers a trial period before signing up for an expensive contract.
Selling stolen social security numbers
Scammers often combine stolen social security numbers with real names to build synthetic credit profiles. Some scammers target children by using their SSNs to obtain credit. In some cases, this results in negative marks being left on a child’s credit report. This can make it difficult for the child to build a credit history as an adult.
Scammers also try to disguise the fact that these numbers are stolen by using false information. Credit privacy numbers (CPNs) are nine-digit numbers similar to SSNs. These numbers are often sold to credit repair scammers for thousands of dollars. The scammers may also ask victims to fake their SSNs and fill out fake applications.
Many credit repair companies advertise that they can help people get a new credit identity. While this is an enticing offer, it is not a legitimate practice. In some instances, they will ask customers to pay for a new identity, such as an employee identification number obtained from the IRS. In other cases, they may try to sell credit privacy or protection numbers instead. This is illegal and can lead to criminal prosecution.
Credit repair scammers often use stolen social security numbers to scam people into signing up for their services. They may try to get victims to apply for a false EIN, falsely claiming that the victims were victims of identity theft. This is a serious crime and may land you in prison, so you should avoid buying stolen social security numbers from these companies.