Credit Repair - The Process, and How to Detect Scammers

Strike while the iron is hot! That is exactly what scammers and fraudsters are doing with credit repair. Because of the current financial crisis, more and more people are getting into uncontrollable debt and, as a consequence, many of these people are seeking help.

There is help available, but telling the difference between legitimate organizations who offer assistance and duplicitous fraudsters who are out to take advantage of the current credit crunch is nearly impossible, unless you know what to look for.

Recognizing the Problem

If you are realizing there’s a problem and you’re slowly, or even hastily, taking steps backward, getting help is a good idea.

There are no magic fixes, no secret loopholes to slip through and no tricks of the trade to expose. Removing debt from your record has to be done legitimately by the credit bureau or the actual creditor. And, it has to be a legitimate error.

Getting Help and Being Careful

Isolating the cause of the problem is the best place to start, and for many of us that means credit cards. Credit card debt continues to spiral out of control, and often the only answer is to use another credit card to pay the first. This turns into a huge vicious circle.

Soon you’re taking up credit card offers regardless of the interest rates and penalties for late payments. It becomes a juggling act in the hope that some magic fix will emerge. However, there are no magic fixes. However, there are credit counseling services that can help you, in the form of education and payment plans. Another route is fixing your credit report to raise your score. This allows you to negotiate loans and your current debt at lower interest. Credit repair companies exist to help you with this - however, this is where a lot of scammers operate as well.

Credit Repair Scams

Don’t be tempted by companies offering a quick and instant fix to your credit woes. Correcting a serious debt problem will take time and discipline. There are some fantastic counseling services available that can offer suggestions and action plans. However, the minute you start talking to a salesman who tries to get you excited about what their company can do is the minute you need to take a step back and have a good look at the organization.

Some of the tricks these bogus credit repair companies use include getting the individuals’ debt temporarily dropped, only to then be reissued a short time later, usually after you‘ve paid their fee. It’s easy to do - simply dispute an item on your credit report. The creditor has 30 days to respond that the charge is legitimate. If they do not, that item is removed. This gives the individual the perception that the bad history has been fixed. However, the creditor may just take longer than 30 days to respond, and once they do, the item is placed back on the credit history again.

Another trick is getting an individual to apply for an IRS Employer Identification Number, then provide that EIN as their Social Security number when applying for credit. Creating a false identity is a felony and is easily noticed. Think about it - an adult with absolutely no credit history suddenly popping up in the system will trigger alarm bells somewhere important. If an individual tries this, they can go to prison.

A third way to get your money is the way credit organizations work - they negotiate on your behalf with your creditors. You then set up a payment plan (often at a lower interest rate), send the money to the organization, and the organization sends the money to the creditors. Scammers exploit this by setting you up with a payment plan like any legitimate credit counseling company, but instead of sending it on to your creditors, they keep the money for themselves and skip town! A sneakier method includes skimming a large “service fee” off your monthly payments and sending less to your creditors than you thought. They will often mask this unjustified service fee in legal forms and confusing accounting methods so you don’t see it.

Real Credit Repair Methods

There are no gimmicks or tricks. You ask for your credit report, review it for any mistaken items, and report it as a claim. The claim process is in place because mistakes can be made, and consumers have the right to review their credit history. These days, identity theft is a plague, so it also makes sense to keep an eye on your history and report any mischief.

However, what if your bad credit history is real? In the past, you may have skipped payments or defaulted on loans due to ill luck or bad decisions. The only way to improve your score is to begin today to put your finances in order. Good credit practices will then begin to show up on your report, slowly diluting and balancing your bad credit. Presto, your score begins to climb higher. There’s no tricks or secrets to this.

Legitimate credit repair companies will argue your case on your behalf, and never charge you up-front fees. They will have attorneys and legal specialists on staff to review your credit items you believe to be a mistake, and write up dispute letters in your name.

One criticism to be aware of is that companies will often use a template of a dispute letter, meaning they use the same form letter over and over, only tweaking it slightly by adding your name and some easy paragraph and send it off. This leads some to wonder why they need to pay monthly fees for something they can easily do themselves. The answer is to ask lots of questions and see what other valuable services they may be able to offer you. Sure, employees of a credit repair company may base most of their dispute letters starting on the same form, but submitting and following up on the dispute may be where your time is saved. There may also be special cases where an attorney has to be more involved, yet you will still pay the same monthly fee.

If you go it alone - and good credit repair companies will give you free advice on how to go about doing it, sample dispute forms are available form the reporting credit bureau. There is no charge to query errors (except your time and postage), and your credit report will not be affected.

If you’ve recently had a loan application turned down and can’t understand why, or your interest charges have gone up, it might be worth checking your credit history to find out why.

Related Articles:

• Seven Steps to Disputing Bad Credit – A Do It Yourself Job
• Watching Your Credit by Ordering Your Credit Reports
• How to read a credit report to improve your score
• Where To Get Your Free Credit Report
• When You’re Sinking In Debt, A Credit Counseling Service Can Get You Out Of The Quicksand
• Using Credit Repair Services and Avoiding Scammers
• Trigger Leads – What Happens When A Lender Pulls Your Credit Report?
• The Truth behind Non-Profit Credit Counseling Organizations
• Should You “Opt Out” of New Credit Offers?
• How Many Credit Accounts Should I Have?