More Harm Than Good: Beware of Credit-repair Scams

September 16, 2008

"Bad credit? No problem!" You see these puffed uppromises all over television and the Internet. For physicianswith an overwhelming amount of credit card debt who findtheir creditworthiness is shot, these quick fixes seem like agodsend, as they will "eliminate" bad credit, bankruptcies,judgments, liens, and bad loans from your credit file.Eradicating a lifetime of terrible credit for a small fee is atempting offer that lures many consumers. The truth is,according to the Federal Trade Commission (FTC), no onecan legally remove accurate and timely negative informationfrom a credit report. Although some legitimate credit-repairfirms can help you to dispute inaccurate items, no third partycan make debt disappear. "There is no such thing as legalcredit repair, and that's the first warning sign," says RodGriffin, manager of public education at Experian. "Anorganization that requires up-front payment before providingservice or asks that you change your identifying informationis violating the Credit Repair Organizations Act."

"Bad credit? No problem!" You see these puffed uppromises all over television and the Internet. For physicianswith an overwhelming amount of credit card debt who findtheir creditworthiness is shot, these quick fixes seem like agodsend, as they will "eliminate" bad credit, bankruptcies,judgments, liens, and bad loans from your credit file.Eradicating a lifetime of terrible credit for a small fee is atempting offer that lures many consumers. The truth is,according to the Federal Trade Commission (FTC), no onecan legally remove accurate and timely negative informationfrom a credit report. Although some legitimate credit-repairfirms can help you to dispute inaccurate items, no third partycan make debt disappear. "There is no such thing as legalcredit repair, and that's the first warning sign," says RodGriffin, manager of public education at Experian. "Anorganization that requires up-front payment before providingservice or asks that you change your identifying informationis violating the Credit Repair Organizations Act."

Modern Credit Swindles

Armed with the knowledge that there's no magical quickfix for your credit, it's easy to spot the wide variety of scamsout there. Bankrate.com warns consumers to beware ofcredit-repair companies that contact you, use hard-sell tactics,and make extreme promises. Some companies mayclaim that they have an "in" with the credit agencies, butthat's simply not possible. If they don't just take your moneyand run, their most likely course of action will be to floodthe credit agencies with frivolous disputes over your debt. Ifthe credit agency investigates, your debts may disappear duringthe investigation, which the scam company will showyou as proof that your debt has been cleared, but thisimproved credit won't last.

Another scam will lead you to believe that the bogus credit-repairfirm can obtain a new, clean credit file for you by havingyou apply for a new taxpayer identification or EmployerIdentification Number. This is illegal, and if you fall for ityou could get in big legal trouble. Scammers hook consumersinto doing this because they don't fully explain thescheme, so the victim doesn't really know what they're gettinginto. "If a consumer alters or falsifies their identifyinginformation to hide from their true information, they alsoare committing fraud and could face legal penalties, includingfines or imprisonment," Griffin explains. Not only is itillegal, a new file would still have thesame information and history becausethe consumer has to provide the samename and address.

There is even a smaller scam thatentices a consumer to call a 900-numberfor credit-repair help, and thescammer keeps the victim on the lineas long as possible to run up the per-minutecharges. This is just one exampleof the myriad ways credit conartists try to pry money out of the walletsof financially desperate people."Ironically, one of the most onerousthreats they will make is to report lackof payment to a collection agency,which would then report the unpaidfees to a credit reporting company, furtherdamaging the person's credit history,"Griffin says.

Do Your Own Legwork

In reality, anything a credit-repairclinic claims they can do for you legally,you can do yourself. According tothe FTC, every consumer has the rightto ask for an investigation of informationin their file that they feel is inaccurateor incomplete, free of charge.The Fair Credit Reporting Act entitlesyou to a free report if a company takesan adverse action against you (eg,denying an application for credit, insurance,or employment), which willprovide you with the name, address,and phone number of the consumerreporting company. Of course, you'realso entitled to a credit report at nocost once a year from each of the bigconsumer reporting companies (ie,Equifax, Experian, and TransUnion).Also, you can argue errors or outdateditems for no charge by contactingthe consumer reporting company andthe entity that provides informationabout you to them.

The first step you need to take in acredit dispute is to inform the consumerreporting company in writingthat there is information in yourreport that you feel is inaccurate,clearly identifying each disputed item,along with copies of the appropriatedocuments to back up your claim.Send the letter by certified mail andrequest a return receipt so you canhave a record of what the consumerreporting company received. Theymust investigate your disputed itemswithin 30 days, unless they consider itfrivolous. The reporting company forwardsyour data to the organizationthat provided the information (ie, thecredit card company), and if they findthat the disputed items are indeederroneous, then they must notify Equifax,Experian, and TransUnion so theinformation in your file can be corrected.If your dispute isn't resolved, youcan request that a statement of the disputebe placed in your file and in subsequentreports.


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