If you’ve ever seen ads promising that your bad credit can be fixed quickly and easily, you may have wondered if these services really work. The truth is, many of these ads are simply scams preying on consumers looking for an easy fix. Don’t fall prey to these fraudulent schemes.
Red Flags to Look Out For
- False Claims of Erasing Credit History
Be cautious if a credit repair company promises to remove negative or accurate information from your credit report. They might claim that only they have the ability to remove old or incorrect data. These claims are false. Legitimate credit repair can only address incorrect or outdated information, not erase valid negative records.
- Demanding Large Upfront Payments
A big warning sign is if a company asks for a large sum of money before they’ve completed any work. Don’t pay upfront. A money-back guarantee doesn’t always protect you from a disreputable company, and chances are, you won’t see the service promised.
Avoid the “New Credit Identity” Scam
If you’ve filed for bankruptcy, you might be targeted by a scheme called “file segregation.” This scam promises a way to hide negative credit history by creating a new credit identity. However, file segregation is illegal. If you engage in this practice, you could face fines or even imprisonment. Always be cautious when companies suggest setting up a new credit identity as a “solution.”
Other Common Credit Repair Scams
Aside from traditional credit repair scams, there are several other fraudulent schemes you should be aware of:
- Credit by Phone Scams
Be cautious of pay-per-call or 900-number services that promise “guaranteed” credit or loans with a simple phone call. In reality, these services may only provide you with a list of banks offering low-interest credit cards or a booklet on how to establish credit. Often, you’ll be left with a hefty phone charge of $50 or more — without any actual credit.
- Gold or Platinum Card Scams
Some companies promote gold or platinum cards claiming they will help build your credit. While these cards may sound appealing, they often come with hidden terms. Many are only valid for purchasing items from a limited catalog, and they won’t help you get other forms of credit. Some even charge high fees just to access the information, typically through a 900 or 976-number call.
- Checking-Account Scams
These scams are designed to steal your personal information. You may receive a postcard promising easy credit approval or low-interest credit cards. When you call to inquire, you’ll be asked for your checking-account number as “verification.” This information is then used to create unauthorized charges on your account.
What to Do If You Suspect a Scam
If you believe you’ve encountered a credit repair scam, take action immediately. File a complaint with your state’s Attorney General’s Office online or call the Consumer Protection Hotline at 1-800-392-8222. Reporting these scams can help protect others from falling victim.
Protect Yourself
Never provide your bank account or credit card information to a company unless you are sure it’s reputable. Always research a company before engaging with them, especially if they promise quick fixes or guarantee results.
