So-called “credit repair” companies claim they can remove negative information from credit reports. Advertising as “Credit Counselors,” “Credit Score Correction Services,” or “Credit Consultants,” they advertise variations of this message: “Denied due to bad credit? We can help!” Many of these companies charge hundreds, if not thousands of dollars for the promise of “cleaning up” bad credit reports. But the truth is that these companies can only do what you could do, at no cost.
No one can remove accurate negative information from your credit report. No company has the “secret” ability to remove all negative information.
But this does not stop their claims. This misleading quote is from a credit repair company brochure: “Cancelled accounts, collection accounts, judgments, tax liens, garnishments, and even bankruptcies can be removed from your credit records in less than a year.” (average five to seven months).”
One tactic is to bombard credit reporting agencies with requests to verify information. If a credit reporting agency cannot verify an entry within 60 days, it will remove the information from the report. But if the information is later verified to be accurate, it will be re-included in the report.
Before you even consider signing up with a company that promises to repair your credit, remember these facts:
- You can get a copy of your credit report on your own.
- You have the right to dispute entries on your credit report.
Beware of guaranteed credit offers!
Credit repair and other companies often claim that they “guarantee” you get a credit card, regardless of your credit history. In fact, these companies do not always honor their guarantee. Sometimes they will just take your money and walk away; you won’t get any credit regardless of what they promised.
If they do get you a card, it will often be a “secured” bank credit card, with high up-front “application” fees, requiring you to deposit and keep several hundred dollars in a savings account, or a card that only allows you to buy items in a catalog from a business you’ve probably never heard of. (You can apply for a secured credit card yourself. For a free list of banks that don’t charge application fees for secured cards, see Consumer Action’s information in the “For More Information” section below.)
Credit repair companies often advertise on television, in newspapers, and even on matchboxes. They sometimes require consumers to dial a “900” phone number to get more information. Calls to 900 numbers can cost $2 or $3 per minute, so listening to a few minutes of card information can be expensive.
Some companies try to get people to apply for a credit card by using financial information from other people with good credit. It is a criminal act to apply for credit in another person’s name; do not do business with one of these companies.
Law enforcement agencies have shut down many credit repair teams, but it’s hard to stop a fraudulent credit repair team unless people complain. So, be careful when responding to credit repair ads, and be sure to file a complaint with the agencies listed below if you think a credit repair company has taken advantage of you.
For more information
- The Federal Trade Commission (FTC) publishes consumer information on credit and enforces federal credit laws. For a list of free publications, write to the FTC’s Public Reference Department at the address below. Although the FTC does not handle individual cases, it can act when it sees a pattern of possible violations of the law developing. Complaints about credit reporting agencies and credit repair scams must be made in writing. Send them to: FTC Credit Practices Division, 6th St., NW, Washington, DC 20580.
- Contact your local consumer protection agency or state Attorney General’s office. Many attorneys general have toll-free consumer hotlines. These numbers may appear in the “self-help” or government sections at the top of your phone book. These agencies can offer you advice and can also help resolve your complaint.
- You can contact Consumer Action’s toll-free complaint/information switchboards that offer tips and advice for non-legal consumers from 10 am to 2 pm on weekdays. Chinese, English and Spanish are spoken. Call (415) 777-9635 (San Francisco office) or (213) 624-8327 (Los Angeles office). Consumer Action has a free list of secured credit card banks that don’t charge application fees. To receive a free copy, send a self-addressed, stamped envelope to: Consumer Action Secured Credit Card Survey, 717 Market St., Suite 310, San Francisco, CA 94103. (Available in English only).
- The Consumer Credit Counseling Service (CCCS) helps consumers who are having trouble paying their bills, before their good credit rating is affected. Your local CCCS office can help you work out flexible payment plans to make repaying your debt more feasible. Call (800) 388-CCCS for an interactive recording that will provide you with the phone number of the office closest to you. Spanish speakers can call (800) 68-AYUDA (800-682-9832) between 8 am and 7 pm Central Time.
- Before you sign a contract with any business, check with your local Better Business Bureau (BBB), a non-governmental service that advises consumers on fraud prevention. Call your local BBB. If you can’t find a local number in the phone book, call the Council of Better Business Bureaus at (703) 276-0100 for a referral to the nearest office.
