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Warnings About Hiring Credit Repair Agencies

Last Updated: October 14, 2011

You see the advertisements in newspapers, on TV, and on the Internet. You hear them on the radio. You get fliers in the mail. You may even get calls from telemarketers offering credit repair services. They all make the same claims:

• "Credit problems? No problem!"
• "We can erase your bad credit -- 100% guaranteed."
• "Create a new credit identity -- legally."
• "We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!"

Does it all sound too good to be true? Well, it is! These are the typical claims of shady credit repair organizations who target the most vulnerable consumers. Comsumers who are struggling with bankruptcy or have had problems rebuilding damaged credit reports and credit scores seem to be the people who fall for these fraudulent promises. These companies promise, for a fee, to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job. Generally, they can't deliver. After you pay them hundreds or even thousands of dollars in fees, these companies do nothing to improve your credit report. Instead of improving your credit, you may end up deeper in debt and see your credit score actually get worse.

Beware of Companies Who Make Certain Claims

If you decide to respond to a credit repair offer, beware of companies that:

• Want you to pay for credit repair services before any services are provided.
• Do not tell you your legal rights and what you can do, yourself, for free.
• Recommend that you not contact a credit bureau directly.
• Advise you to dispute all information on your credit report or take any action that seems illegal, such as creating a new credit identity. If you follow illegal advice and commit fraud, you may be subject to prosecution.

Thanks to the Credit Repair Organizations Act, it's a crime for anyone offering credit repair services to require you to pay until a 3-day right of rescission period after they've delivered the services. Also, by law, credit repair organizations must give you a copy of the "Consumer Credit File Rights Under State and Federal Law" before you sign a contract. They also must give you a written contract that spells out your rights and obligations.

What to Do if You've had Problems with Credit Repair Companies

If you've been taken advantage of by a credit repair organization, contact the FTC. You can file a complaint at www.ftc.gov or by calling 1-877-FTC-HELP. The FTC can also start administrative proceedings against the credit repair organization and individual states can sue the organizations to stop them from violating the Act and to recover damages you may have suffered. Although the FTC cannot resolve individual credit problems for consumers, it can act against a company if it sees a pattern of possible law violations.

National Fraud Information Center

The National Fraud Information Center (NFIC) also accepts consumer complaints. You can reach NFIC at 1-800-876-7060, or at www.fraud.org. NFIC is a private, nonprofit organization that operates a consumer assistance phone line to provide services and help in filing complaints. NFIC also forwards appropriate complaints to the FTC for entry on its telemarketing and credit repair agencies fraud database.

Law Firms Offering Credit Repair

There are a number of law firms which have moved into the credit repair market, such as Lexington Law. What difference does it make to have a law firm working on your credit repair? Not much. They go through the same process and do the same thing as the non-law firm credit repair organizations.

Why do we endorse Lexington Law? We've visited their office and talked to their employees. We've reviewed their credit repair procedures and we can truly endorse them. Their credit repair methods resemble the self-help strategies we have published on creditinfocenter.

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