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How To Avoid Credit Repair Fraud

How To Avoid Credit Repair Fraud

Falling victim to credit repair fraud is an all to common occurrence. Consumers often get desperate when trying to eliminate excessive debt and stop hounding collections companies. Unscrupulous firms will offer fanciful and unrealistic credit repair promises such as eliminating all negative marks from a credit report or starting a new credit identity. These often illegal claims, normally cost consumers hundreds if not thousands of dollars and yield little to no legitimate results. If you know the red flags ahead of time you better prepared to protect yourself from credit repair fraud.

Customer Care

Any good business will inform a potential customer of how they can handle certain services themselves. This way individuals can save money before seeking the help of a third-party organization. If a credit repair company your meeting with does not inform you of your legal rights when instituting credit repair strategies they do not have your best interest at heart and only want your money.

Unsubstantiated Claims

Many fraudulent credit repair companies will make unsubstantiated claims assuming the customer is either ignorant or stupid. A common claim is the ability to remove any and all negative or black marks which appear on a customers credit report. Legally, there is only one entity able to remove a black mark from a credit report under normal conditions. For a black mark to be removed from a credit report prior to it falling off after a given date, the reporting company will have to update the corresponding credit entry. A credit repair organization cannot and is not legally able to do this.

Discouraging Rhetoric

In an effort to get your money, one high-pressure sales tactic includes discouraging customers from being proactive and taking measures into their own hands. It's the exact opposite of customer care. Not only do they not helpfully tell you what you can do but they actively discourage you from doing anything at all. An honest credit repair company will only be supportive and offer their services if it is appropriate for your situation. They will never be negative and they will never use scare tactics to prevent you from calling creditors yourself or writing the credit bureaus to fix inaccurate information.

Payment Up Front

This advice goes for every business everywhere for any situation. Whether it's head shots for modeling or food at a restaurant, any business that requires payment up front should be avoided at all costs. Any legitimate operating company will provide a product or service and then require payment after-the-fact. If you are dealing with a credit repair company that requires hundreds of thousands of dollars to get the ball rolling, it's a scam.

Challenging Everything

The way federal laws are written with regards to correcting inaccurate information as its appears on credit reports means credit bureaus have 30 days to address all notifications. If they fail to address the notification in the 30 day window, they are legally required to remove it from the credit report. Some fraudulent credit repair companies will encourage clients to challenge everything, even information known to be accurate. This is not only bad advice but is also likely illegal.

File Segregation Advice

Creating a separate credit identity is illegal and often referred to in credit repair fraud as file segregation. File segregation retains the same personal information but places it under a new Employer Identification Number obtained from the Internal Revenue Service. Then, as the consumer open new lines of credit or new financial accounts, they are directed to use the EIN as opposed to their existing credit damaged Social Security Number. This is illegal advice and misuses an EIN which is intended solely for businesses. Fraudulent use of an EIN can result in federal prosecution and if used over the Internet or on the phone can be considered wire fraud.


Needless to say, it is fairly easy to spot fraudulent credit repair companies. They tend to offer deals too good to be true, require money up front and discourage potential clients from thinking or doing for themselves. Reputable nationally recognized debt consolidation and credit repair organizations will provide a written contract outlining services provided and associated costs. They will not charge any money until services are rendered and said services can be verified with lenders and other financial institutions. Educate yourself and take steps to contact lenders to renegotiate terms, offer settlements on outstanding debt and work with creditors to your mutual advantage. There are many credit repair strategies consumers can take on their own before needing the services of a credit repair organization.

Image by: Curtis Cronn