How to tell if a credit repair company is a scam or legit Ask for payment before performing any work on your behalf, promises or guarantees the removal of negative data from your credit report, even when accurate, asks or advises you to deceive credit reporting companies about one or more of your accounts. Warning signs of credit repair scams include companies that ask you to pay before you provide services. The company may tell you that it can guarantee a specific increase in your credit score or remove negative credit information on your credit report, even if the information is accurate and up to date. A fraudulent credit repair company, for example, may claim that it can help you hide negative account information or bankruptcy.
After you pay the company, they may provide you with a nine-digit number that looks like a Social Security number, calling it a credit profile number or credit privacy number. They may also direct you to request an Employer Identification Number (EIN) from the Internal Revenue Service. Legitimate credit repair companies can ensure that inaccurate information is removed from your credit reports so that it doesn't hurt your credit rating. However, they can't do anything for you that you can't do for you if you're willing to put in time and effort.
It is illegal for credit repair companies to advise you to make false statements to credit reporting agencies. It is also illegal for these companies to promise to eliminate all they can best do is try. If a company makes promises, it is not a legitimate company. Credit repair companies are organizations that claim to help consumers improve their credit in exchange for a fee.
Work with credit bureaus and creditors on your behalf to eliminate errors from your credit report. While many of these companies are scams, there are legitimate credit repair companies. Under the Federal Credit Repair Organization Act (CROA), credit repair companies cannot make false statements about what they can do for you and cannot charge you before they have done any work for you. Credit scores are calculated based on information in the consumer's credit report and sometimes that information is inaccurate.
If you're facing a less-than-perfect credit history, it may be tempting to call credit repair companies, but that's not the best step to take. If the credit reporting agency approves your dispute and removes the false information, you should see a credit rating increase. By law, you are entitled to a free credit report every 12 months from each of the three major national credit bureaus: Equifax, Experian and TransUnion. This notice must contain the contact information of the credit bureau that submitted the report that the lender reviewed and explain that you are entitled to a free copy of that credit report within 60 days.
Credit repair companies can guide you through the process described above, and many also offer additional services, such as credit monitoring. The best credit repair companies work with you to help you repair and rebuild your credit the old-fashioned way. Dealing with a poor credit score or negative ratings on your credit report can be damaging both financially and emotionally. One of the most important tasks of credit repair companies is to help consumers dispute errors in their credit reports.
Suspicious companies claim they can remove bankruptcies, liens and bad loans from your history, or even completely erase a bad credit history, helping you start over with a new credit identity that will make you look like a better risk to lenders. Sometimes, these companies also work with you to help you understand your credit report and monitor your credit. This is why paying high balances that are rising relative to your credit limit can significantly and quickly improve your credit. A credit repair company is a third-party organization that works to improve consumer credit reports and scores for a fee.