Credit Repair Scams

 If you have poor or damaged credit and want to repair it, you may have considered using a credit repair service to help. Unfortunately, there are many companies that will take advantage of unsuspecting consumers needing help with their credit. 

While there are legitimate companies that can help you repair your credit, there are also credit repair scams that are only after your money and your information for identity theft purposes. To keep both safe, Cobra Credit is communicating this guide to help you tell the difference between legitimate credit repair companies and credit repair scams.

There are many things credit repair companies are not allowed to do or promise customers. If it sounds like it’s too good to be true, it probably is, and you should steer clear of that company. We’ve put together a list of signs you should watch out for when working with credit repair companies.

Guaranteed Results

Under the Credit Repair Organizations Act (CROA), credit repair companies cannot guarantee results. 

Upfront Payment is Requested

The CROA prohibits credit repair companies from asking for any payment before they render a service. All credit repair companies are required by law to give you at least three days to cancel services with them and there is no penalty for canceling.

Claims a New Identity is Needed 

A credit repair company can’t promise or offer you a new identity. Anyone offering you a new identity is a fraud. Besides guaranteeing results, scammers may try to promise you a clean slate with a new Employer Identification Number (EIN) or a Credit Privacy Number (CPN). 

Don’t Explain Your Legal Rights

Credit repair companies should explain your legal rights to you from the beginning. These are a few common things an unethical credit repair company might do.

• Doesn’t give you a copy of the contract to review before signing
• Leaves out important information from the contract, like the date services will be executed or the amount you will pay

If you feel like the company isn’t telling you everything or refusing to answer your questions, you should seek services elsewhere.

 You’ll most likely see credit repair companies illegally promising results. However, it’s important to familiarize yourself with other scams so you understand what is and is not legal. We highlighted a few common ones below.

File Segregation Schemes 

A file segregation scheme is when a company or individual offers to give you an Employee Identification Number (EIN) to use in place of your Social Security Number when you apply for credit. It’s illegal for companies to do this, and it’s illegal for consumers to obtain one to use in place of their Social Security Number. 

Credit Privacy Numbers 

Like an EIN, a Credit Privacy Number (CPN) is created by scammers to use in place of your Social Security Number when applying for credit. Simply put, a CPN is a fake Social Security Number. Usually, these are created using somebody else’s identity, and using one can be considered identity theft. 

Tradeline Renting 

Tradeline renting is when you pay for authorized user status so that the tradeline shows up on your credit reports to improve your score. This doesn’t repair any negative information on your credit, but adding a positive tradeline to your credit report can boost your score.

While this isn’t necessarily illegal, it can get you into trouble. There is nothing wrong with a loved one adding you as an authorized user. However, if you pay to “rent” a tradeline from a stranger, you don’t know how it will impact your credit and it may be a scam to get your money. 

  There are a few things you can do if you realize you’ve fallen victim to a credit repair scam. Take a look at your options below.

• Report the organization to your state attorney general
• File a complaint with the Federal Trade Commission and the Better Business Bureau
• Consult with an attorney if you’d like to take further legal action

 Making payments on time and disputing inaccurate information on your credit reports can help you repair your credit. While you can do this on your own, a professional credit repair company like Cobra Credit will make the process easier and more efficient.

Cobra Credit proudly adheres to CROA to make sure we give our clients the best experience possible. For over a decade, we’ve helped clients challenge information that is unfair, inaccurate and unverifiable. Give us a call today for a free, personalized credit report consultation.