Protect yourself from credit report repair scams

the plastic effectUrban Legend Number 22:  I found a credit repair agency that claims they can increase my credit score back to its former number in just a few months and remove all negative entries from my credit reports.

The Reality: False.

There are a large number of companies that target consumers who have poor credit histories with promises to clean up their credit reports. The truth is no company or individual can remove negative, but accurate, information from your credit reports.

Polly’s Pearls of Wisdom: The Credit Repair Organizations Act (CROA) helps protect you from credit repair scams. It prohibits a credit repair company from making false claims about its services, specifies that they can’t make you pay until they complete the services they promise to you, and requires that they have your signature on a written contract before they can perform any services.

The CROA also provides for a three-day cancellation period for any written contract you may sign. However, since most credit repair organizations do not provide any services that you could not do yourself for free, you should think twice about signing any such contracts.

Many fraudulent credit repair companies are now offering to provide consumers with different business tax identification numbers (e.g., EINs) or new social security numbers (SSN) in order to create a new credit file. This practice, called “file segregation,” is illegal, and it doesn’t work anyway as your new credit files will eventually be connected to your original credit files.

In this fraudulent type of action, the credit repair company asks you to apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS), or a new social security number from the Social Security Administration. Because you made the request, you actually have the liability for the fraud instead of the credit repair company. EINs are used by businesses to report financial information to the IRS and the Social Security Administration.

Such actions are illegal, and may subject you to criminal penalties including fines and jail time in state or federal prisons. So please, do NOT try them. Any request for you to engage in such actions should be considered a warning sign that the company is engaging in scam activities.

You can find additional information on creditrepair scams provided by the FTC online at: (ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm).

If you have been scammed by a credit repair company, you can contact the National Fraud Information Center (NFIC) online at (www.fraud.org) or by telephone at (800)876-7060. The NFIC is a private, nonprofit organization that operates as a consumer assistance center to provide services and help in filing fraud complaints with various government agencies
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Anyone with a large amount of credit card debt can benefit from credit counseling or debt management counseling (see Urban Legend 24).
A low credit score is not the end of the world. A credit score is dynamic and can always be raised over time. Remember, you are more than your credit scoreTM (see Urban Legend 25).

Plastic Reactions:

• If your credit score is low, how does that make you feel?
• How do you feel about the decisions, choices and events that led you to this credit score?
• Would you do anything differently regarding those decisions, choices and events if you had the opportunity to go back and do it again?
• What can you do to improve your decisions about credit card use in the future?
• If you wish to improve your credit score, what emotions are motivating you to make that improvement?
• If you have already spoken with a credit repair agency, how did their claims make you feel? Do you feel differently now that you have read this chapter?
• How would you feel if your credit score were dramatically improved?

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The Arizona Daily Independent has received permission to reprint portions of a timely new book “The Plastic Effect” focused on the urban myths of credit cards and their usage written by Polly A. Bauer, CPCS and Stephen Lesavich PhD JD. Future issues of the ADI will feature “Polly’s Pearls” included in each Urban Legend Myth. “The Plastic Effect” is Copyright by Coconut Avenue, Inc. All rights reserved. No unauthorized reproduction or duplication is permitted without written permission of Coconut Avenue, Inc.