Credit Repair Scams: How to Avoid a Ripoff - Honore Credit Consultant
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Credit Repair Scams: How to Avoid a Ripoff

Credit Repair Scams: How to Avoid a Ripoff

In this article, we discuss the signs of credit repair scams and what you can do if you suspect you’re getting played.

Credit repair scams happen far too often and give credit repair organizations (CRO’s) a bad name. You’ve likely seen cheesy ads from “credit repair” and “credit counseling” companies that promise a “new credit identity” or to “restart” your credit. That’s usually your first sign. As with any profession, the old rule still applies: if it sounds too good to be true, it probably is.

What makes credit repair scams different is the potential consequences of not knowing what you’re getting involved with. If you follow the advice of credit repair scammers, you could wind up committing fraud, yourself, or even an accessory to identity theft. If that sounds scary, it should. These are Federal offenses that carry serious fines and even prison sentences.

But don’t let that scare you away from fixing your credit! The important thing is that you get better informed so that you can avoid credit repair scams. Like any good CRO, we don’t want you to get scammed! So we’re sharing our expertise with you on what to watch out for. 

Red Flags: False Promises and Noncompliance

Credit repair is a highly regulated industry. In fact, not only must we comply with all of the Consumer Credit Protection Act, among other state and Federal laws, there’s even a section just for credit repair: the Credit Repair Organizations Act (CROA).

Any reputable credit repair business is highly motivated to comply with the CROA. That’s not only due to the fact that failing to could lead to serious repercussions for us, but also because we need a good reputation. Our business is largely based on referrals and good rapport with customers. We intend to continue doing business for a long time! Whereas fraudsters can cut ‘n’ run anytime.

As Margaret Reiter says at

“Under the federal law, a credit repair clinic must:

  • give you a written statement of your rights under the Fair Credit Reporting  Act
  • accurately represent what it can and cannot do
  • not collect any money until all promised services are performed
  • provide a written contract, and
  • let you cancel the contract within three business days of signing (you must cancel in writing).

“Any contract that doesn’t comply with the CROA’s requirements is void, and you cannot waive (sign away) these rights.”

Demanding payment upfront is the number one red flag you should watch out for. We never take money from our clients before we perform any services, not only because that’s dishonest, but also because it’s illegal. If a supposed credit counselor, credit repair “clinic”, non-profit, or credit repair organization tries to take your money upfront then walk away.

Watch Out for Fraud

An even worse scenario than losing your money in a credit repair scams is unintentionally getting caught up in fraud. Beware: these are Federal crimes, and anyone who tells you different is lying to you:

  • Lying about your credit history or hiding a bankruptcy on a credit card or loan application
  • Using anything other than your own Social Security number when it’s called for
  • Obtaining an Employer Identification Number (EIN) from the IRS under false pretenses (see below)

No reputable credit repair specialist will tell you they can help you hide your credit history or bankruptcy. On the contrary, we push the credit bureaus to delete or correct any derogatory items that they cannot verify. “Hidden” items are bound to reappear, whereas when the credit bureaus investigate and delete items, they usually stay gone. That’s because it’s the responsibility of the credit bureaus to investigate and verify the accuracy of what they report,

That’s because it’s the responsibility of the credit bureaus to investigate and verify the accuracy of what they report, in accordance with the law. We and other reputable credit repair companies work within the law, not against it.

Identity Fraud

In fact, if a supposed credit repair/counseling company tells you that your credit can be “restarted” with some kind of trick, that’s a sure sign you’re dealing with a fraudster. This is especially true if they advise you to use a new or different Social Security number (SSN). Applying for new credit under a different SSN without disclosing your original is fraud, period.

Also, you should never use another SSN or nine-digit number that looks like an SSN. There’s a good likelihood such an SSN was stolen, if not lifted from someone deceased. This is identity fraud by definition, and you can be held accountable even if you were misled into believing you weren’t doing anything illegal.

But what if they advised you to apply using an EIN or Credit Privacy Number (CPN) instead? These are not equivalent to your Social Security number! Using them in place of your SSN is likely fraud. In fact, it’s also illegal to apply to the IRS for one if you are not actually an employer.

Let the contracts, themselves, and your own conscience be your guide. If it feels wrong or like you’re “beating the system”, don’t do it. A reputable credit repair company will never advise you to commit fraud.

Know Your Credit Rights

The CROA requires all credit repair companies to explain, in writing:

  • your legal rights (including your right to cancel for free within three days)
  • how long it should take to get results
  • the total cost of their services
  • any guarantees they’ve made.

Do not trust anyone who glosses over or omits any of these or brushes off your questions! An incompetent CRO is just as bad as a dishonest one. We don’t want to waste your time and money, and neither should they!

When it comes to your rights under the law, knowledge truly is power. It’s also protection. Going into a situation already having a basic understanding of the law and your rights empowers to know which questions to ask and to spot any red flags.

Credit repair scams and fraudsters hurt our business, as well as the lives of our prospective customers. If you think you’re the victim of a credit repair scam, report them

Every state is different and has different laws governing credit and credit repair, in addition to the Federal Code. Check to see if your state has a consumer affairs office. If not, consider reporting your issue directly to your state’s attorney general.

On the Federal level, there is the Federal Trade Commission or the Consumer Financial Protection Bureau. While they can’t resolve individual complaints, they can investigate whether there is a pattern of noncompliance or fraud.

Use Your Knowledge to Protect Yourself and Improve Your Credit

A well-informed consumer is a plus to any honest credit repair specialist. In fact, we’re delighted when new customers show a basic knowledge of their rights and the law. This lets us spend more time with them on their specific issues and circumstances. 

Salespeople and businesspeople tend to be highly motivated. They’re also just as bored with legalities as you are. However, they won’t ignore your questions if they’ve been properly trained. Rather, they’ll be happy to explain anything you may not completely understand. If they can’t, they should offer to connect you with someone else who can.

If you would like to know more about your rights under the CROA and your options for repairing your credit legally and above-board, don’t hesitate to contact us.

We’re also happy to hear more about your experiences and questions in the comments section below. Feel free to share!

Image credit: "my bank sucks" by Bryan Rosengrant (CC BY-ND 2.0)