Are you looking for ways to improve your credit score? Watch out for credit repair scams: How to spot them.
Bad credit affects millions of Americans, and many people are looking for services to help them repair their credit and get out of debt.
Thomas Nitzsche, a certified financial educator at Money Management International, recently sent the VERIFY team a screenshot of a Facebook post from a person who claims to offer low-cost credit repair services. Nitzsche says social media posts similar to the one below are typically scams, but many people find it difficult to tell the difference between them and legitimate services. Here are tips on how to spot similar fraudulent offers.
WHAT WE FOUND
Red flags to help you spot credit repair scams
Credit repair companies typically promise to clean up credit reports for a fee, but chances are these companies can do something account holders couldn’t do themselves, according to the Better Business Bureau (BBB) and the Federal Trade Commission (FTC) small amount ). That’s because every person has the right to correct inaccurate information on their credit file, but no one can remove accurate negative information, the BBB says.
The BBB and FTC share red flags that can help people identify potential credit repair scams on their websites. These include credit repair companies that:
- Calculate fees before your debt is settled
- Pressures you to pay fees disguised as “contributions”.
- Try to look like a government program
- “Guarantee” to make debt disappear quickly or improve creditworthiness
- Telling them to stop paying debts and communicating with creditors
- Suppose you cannot get additional information without providing personal financial information
- Promise to fix your credit without actually checking your financial situation
- Offer a debt management plan (DMP) without teaching budgeting and money management
- Promise they can delete bad credit or remove information from your credit reports
- Don’t explain your legal rights when they tell you what they can do for you
“If there’s an organization or person that claims they can improve your credit score by 50 points or something like that in the next two weeks, that’s really a red flag,” Thomas Nitzsche told VERIFY.
People worried about credit debt are often vulnerable to quick fixes, but the BBB, FTC, and Nitzche all say that only time and diligent payments can actually repair a person’s credit.
“There are no guarantees when it comes to credit because it’s really just a matter of making good financial healthy habits over time, which will then incrementally improve your credit score,” Nitzsche said.
VERIFIED tools to help you get out of loan debt
Credit counseling is the most comprehensive solution for credit recovery because it uses a variety of resources to solve financial problems, according to the BBB. These resources include budgeting, educational programs, access to advisors, and sometimes a personalized debt management plan (DMP).
A DMP is a system that allows a person to make one monthly payment that covers all of their included debt, according to Money Management International. After your creditors approve the plan, you make a single payment each month to your DMP’s agent, who then splits and distributes the payment to your creditors each month.
The BBB says people who use credit counseling services are protected by the Credit Repair Organizations Act (CROA). According to the FTC, CROA prohibits false or misleading representations and requires certain affirmative disclosures when offering or selling credit repair services.
Legitimate companies that comply with CROA must provide:
- A written contract setting out your rights and the services to be provided
- A three-day cancellation policy with no fees
- Details on how long it will take to get results
- A statement of all costs and fees
- Any guarantees they make through their marketing
The Consumer Financial Protection Bureau (CFPB) and FTC can direct you to legitimate nonprofit resources you can use to improve your online credit score. The US Department of Justice (DOJ) also publishes a list of approved agencies on its website for people seeking loan debt reduction assistance.
In addition, the National Foundation for Credit Counseling (NFCC), the umbrella organization for all nonprofit credit counseling organizations in the United States, can connect you to local credit counseling agencies in your area at nfcc.org.
Nitzsche says that trusted financial organizations, like your bank or credit union, also typically offer free financial wellness tools to their clients.
Report credit repair fraud
If you have a problem with a credit repair company or have been the victim of fraud, fraud or bad business practice, you can report it to the FTC at ReportFraud.ftc.gov, the CFPB at email@example.com, or the BBB at complaint@bbb. org.
You can also contact your Attorney General or your local consumer bureau to file a complaint.