More than 50 percent of Americans during their lifetime were denied a loan, credit card, low interest rates on purchased goods or insurance – or worse, denied a job due to unstable or bad credit, a Forbes article reported. Whenever a lender considers a person high-risk because their credit score is too low, they may fall into the clutches of credit repair scams, hoping to get out of a financial hole, and have good credit. This story is a credit repair alert, a wake up call, to let consumers know of the scams in the credit repair business.
Credit repair companies and independent credit repair operators promise a “quick fix” to clean up credit. These companies charge “from hundreds up to thousands of dollars” for a service you can do yourself.
Smooth-talking credit repair specialists urge consumers to purchase their services by claiming they’re able to easily remove “bad debts” off credit reports, no matter whether the negative “bad debt” information is true. Across the nation, millions have seen the ads on TV, radio, received fliers in the mail, email messages, and even cold calls offering credit repair services.
Credit Repair Alert
Representatives pitch the same eye-catching, seductive offers:
- “Credit problems? No problem!”
- “We can remove bankruptcies, judgements, liens, and bad loans from your credit file forever!”
- “We can erase your bad credit – 100% guaranteed.”
- “Raise your credit score and get a new car, credit cards, or a mortgage”
- “Create a new identity – legally.”
- “Raise your credit score from 400-750 within 30-60 days
Welcome into the world of credit repair.
The credit repair market is worth around $3.4 billion or more in 2021, according to news media reports. That’s lots of money flowing into greedy hands of some people (not every credit operator) who know they cannot legally remove verifiable, updated, reported debts off a person’s credit report.
Credit makes the world turn.
There are many solid, good credit repair companies that follow the law and provide a great service for consumers. The focus of this story is to spotlight the unscrupulous ones that dupe people into believing they can fix bad credit under any circumstances, for a fee.
Bargaining offers are irresistibly tempting to gullible consumers willing to spend their last silver nickel to enjoy an exceedingly high credit score. But a “quick fix” credit score may be nothing more than a pipe dream never to come true.
Just think: if a person with a very low 300-400 credit score can pay a credit repair specialist to have their score magically rise up to 750 or 800 – who wouldn’t want to hire top guns with the “magic touch” capable of adding “hundreds of points” to a credit score.
Having a higher credit score, individuals qualify for the best deals on credit cards, low-interest rates to buy vehicles, a home, a better job, or qualify for bank loans, loans from private lending institutions etc.
“The chances credit repair companies can do anything you couldn’t do on your own are very unlikely,” says Laura Blankenship. Blankenship is the marketing director for the Better Business Bureau serving Eastern Michigan. The Federal Fair Credit Reporting Act (FCRA) grants Americans the right to submit a dispute and request an investigation upon discovering an error or errors on their credit report. Once a dispute is filed the credit reporting agencies, Experian, Transunion and Equixfax must investigate the matter within 30 days unless the credit bureaus suspect the dispute is frivolous.
“Any person can repair their own credit,” says Howard Dvorkin, chairman at Debt.com. “We also pay people to change our oil, but any person can do their own oil change; you have to have some knowledge and do some prep work. It’s the same thing.”
Credit scores fluctuate between 300 and 850. According to Equifax, anything below 580 is considered a “poor credit score.” Decently good credit starts around at 600 and up.
A Federal Trade Commission study found at least 5% of consumers had errors on their credit reports likely to substantially lower their scores. This is why people should check and fix their credit reports.
A different study by Consumer Reports investigation showed the agency asked 5,858 volunteers to obtain a copy of their credit report between February 1, 2021 and April 1st. The ratio of errors discovered on the credit reports of the volunteers showed 29 percent discovered personal information errors and that 11% found account information errors.Erroneous information on credit reports has created a boon for financial specialists running the credit repair services.
Free Weekly Credit Reports
Here is some extra good news:
Consumers are entitled to free weekly credit reports from the three major credit reporting agencies – Equifax, Transunion and Experian until April 2022 – by using AnnualCredit.com
Often when consumers are in dire need of raising their credit score, they rush to credit operators and easily spend substantial fees to have their score raised to obtain huge discounts on material goods and lower interest rates. Yet, even after shelling out the money, many consumers are still left with bad credit or owe money for previous loans after a credit repair agency failed to make good on promises to raise a person’s credit score.
“Before signing any contracts, it’s important to look at the success rate of the company and research reviews online,” Blankenship said.
Based on a NewsBlaze investigation into the questionable practices of credit repair services the FTC(Federal Trade Commission) reports that if a credit repair company/specialist charges consumers upfront money for credit repair, that practice is against the law under the Credit Repair Organization Act.
Curbing Credit Repair Companies
The Federal Credit Repair Organization Act (CROA), which was passed into law in 1996, not only forbids credit repair services to charge upfront fees, it also prohibits companies from making false promises of removing accurate “bad debts” off credit reports. Credit repair is a legitimate service under the CROA that allows credit repair providers to assist consumers in the correction of items on their credit reports proven to be inaccurate, outdated, or unverified.
For instance, if a person made several late payments, defaulted on loans, has a large credit card balance relative to their total credit limit or other common negative marks, and if these items are true, there is nothing a credit repair company can do.
Nonetheless consumers with bad credit are not alone. Recent data from Experian shows approximately 12 percent of Americans have a FICO score below 550. Even consumers with fair credit scores between 580 and 669, can experience difficulties obtaining loans, securing mortgages or applying for new credit cards.
Reputable credit repair providers check credit reports for negative information/debts that are still owed but the debt shouldn’t be listed. Pinpointing any errors, the credit agency will dispute a single or multiple items on a consumer’s behalf. Many credit services also check to ensure the unwarranted items do not reappear.
Unsubstantiated debts/negative information must be removed because it contributes to lowering a person’s credit score when the score should be higher. Although an unverified debt can be removed, it can be reinstated later if, for example, a debt owed to a retailer is no longer in business unless the retailer sold the debt to a collection agency that is able to show true ownership.
A person’s credit score can gradually rise if false information is taken off. However, credit specialists cannot remove verifiable bankruptcies, defaulted mortgage loans and liens. Most credit repair providers charge up to $100-$200 dollars per-month to handle false reported debts and related items included on credit reports.
Removing Bankruptcy and Mortgage Loans
Some credit repair providers falsely advertise how they can remove bankruptcy and mortgage loans off someone’s credit report. Don’t believe it because:
- Chapter 7 Bankruptcy(liquidation) stays 10 years on a credit report after the original date of filing the petition
- Chapter 13 Bankruptcy( wage earner’s plan) stays 7 years after the original date of filing the petition
- Money Judgements/Debts Owed: Seven years after the original entry of the judgement
- Late payments: Seven years after the date of missing the payment
- Collection accounts: Seven years after the date of the delinquency date as reported by the creditor to the credit reporting agency
Legally Removing “Bad Debt”
As stated, though, legitimate credit repair providers can, in fact, remove “bad debt” information that qualifies under federal law for removal, including credit reports that also include; a remaining debt on a credit report past the seventh year statute of limitations that also qualifies for removal (under CROA law) because inaccurate information contributes to dragging down a person’s credit score.
Among errors a consumer can legally discharge off credit reports:
- Accounts not belonging to a person
- Bankruptcy or legal actions not belonging to you in the first place
- Bad spellings included in a negative report which belongs to someone else with a similar name as yours. When this happens positive credit information won’t show up on your credit reports when it should
- Outdated negative information that shouldn’t be included in your credit reports after seven years unless the item is a bankruptcy
- Debt amounts already paid but still appearing beyond the statute of limitations
An inquiry or negative items that a person simply doesn’t like or refuses to pay back is a debt that cannot be disputed.
Credit Repair Services on Youtube, Social Media & Internet ADS
Poor credit scores may seem impossible to fix until the wandering eyes of a desperate individual spot catchy advertising on TV, social media, or they receive a phone call or scroll over to YouTube and Facebook where marketers offer to fix low credit scores.
Shady repair companies often claim their expertise can quickly remove bankruptcies, liens and bad loans off your credit history. Upping the ante, some credit operators will claim to erase bad credit history altogether, which, if true, can instantly help someone restart with a new credit identity, thus helping the person’s credit score to shine like gold to lenders – if a credit score is excellent, meaning there’s not much risk for the lender.
Using Lies and Tricks To Bilk Consumers
Investigation shows how a particular credit repair representative falsely stated their company had Federal Trade Commission(FTC) approval to boost a client’s credit score to 700 in 120 days or less.
Unfortunately, these representatives lied about having FTC approval to boost their client’s credit scores!
Too often, vulnerable and desperate people looking for a “quick fix” to repair their poor credit to reap the immediate rewards of having good credit easily fall prey to deception.
Many representatives and marketers appearing on YouTube and Facebook hope to convince consumers of “tricky” and illegal ways to fix their bad credit. Consider this targeted ad to induce consumers: See your credit score grow from 400 to 780 in 3 weeks. Yes! FTC took action in June 2019 to stop a credit repair service called Grand Teton Professionals, a company that pitched “fake credit repair services” throughout several websites, including DeletionExpert.com, InquiryBusters.com, and TOPTRADELINES.com.
An FTC complaint alleged the defendants bilked unsuspecting consumers out of a combined total of $6.2 million. Since 2014, the FTC stated, the company and its websites operated an unlawful credit repair scam by deceiving consumers across the nation.
Bad Debts, Negative Items on Credit Reports Instantly Disappear
Ridiculous claims by Grand Teton included bogus promises that their expertise could easily remove “bad debts” and other negative remarks off their client’s credit report. Whenever the company was hired they’d charged up to thousands of dollars in illegal upfront fees, according to Gregory Ashe, Senior Staff Attorney for the FTC in Washington, D.C.
Even worse, the company and its affiliates forced their clients to sign an agreement prohibiting clients from making online defamatory comments about them. If a client breaks the agreement they automatically face a $250,000 fine for making negative remarks about the company’s credit repair work.
The disclosure threat should’ve been grounds for a lawsuit itself.
“It’s enough to chill a consumer who believes it means what it says,” Ashe told Detroit Free Press.
Ashe further said the threats to sue consumers who blabbered their mouths on the internet about the company’s questionable practices led to other consumers’ inability to discover complaints. Without complaints to review, duped individuals deemed it safe to send these credit repair companies thousands of dollars for a service they could’ve either done themselves or used a free debt counseling agency funded by the U.S. government.
Ignoring the questionable agreements, some consumers filed complaints with the Better Business Bureau, FTC and to their Attorney General. Complaints filed with FTC are compiled and monitored by the Consumer Sentinel Network(CSN). CSN is an online FTC investigative tool.
Complaints against Grand Teton assisted the FTC to make a solid case against the company.
Consumers must educate themselves and stay away from credit repair companies promising to remove negative information, repossessions and bankruptcies off their credit reports even if the items listed are true and accurate. Negative items can be removed if the statute of limitations runs past seven years on general debts and if a bankruptcy hasn’t been removed after ten years.
Overwhelming Credit Bureaus: Slick Jamming
A reputable credit repair provider will legally help consumers dispute and remove incorrect information on a credit report(s). By contrast, the scammers claim to clean credit reports through a slick tactic called “Jamming.”
With “Jamming” the scammer hopes the credit bureaus lack sufficient time and resources to investigate repetitive, voluminous and even misleading documents to bolster a dispute.
They are hoping the credit bureaus will remove the bad items on your credit report, thus raising your credit score. Such an approach ignores the fact that credit bureaus have resources to automatically process disputes.
Participation in “Jamming” is likely to subject the consumer to civil and criminal penalties for making false statements.
Have Good Credit? Make Big Money Sitting At Home
“I can actually make quite a bit of money every week by letting CreditCardCashFlow add people to my credit card,” says a New York gentleman named Charles, in a YouTube video.
Yes, there are YouTube videos featuring scam artists offering big bucks to people with great credit to simply sit at home and do nothing. But when it comes to money there’s always a catch-22.
The FTC alleged CreditCardCashFlow solicited consumers with long-term, positive payment histories to add unknown outsiders as authorized users on their credit accounts.
The glitch is this: the person with bad credit who is added to someone’s account with very good credit, the bad credit person cannot use the CashFlow card to make purchases.
“Defendants offer to pay these account holders to add other consumers as authorized users to their accounts, which includes third parties who aren’t family members or otherwise in close personal relationship with the account holder,” FTC stated in its investigative report.
The FTC investigation showed, for instance, how consumers handed over between $1100 to $4000 to Top Tradelines to piggyback on another person’s credit card accounts to build their own good credit history.
“For a fee, defendants offer to register consumers as additional authorized users on- one or several credit cards – or line of credit accounts held by unrelated account holders with long-standing positive payments (a practice known as piggybacking on credit).”
Piggybacking on good credit is usually reserved for parents to list a blood relative or spouse as an authorized user on their good credit to help the relative build credit.
On March 9, 2020, FTC settled a lawsuit for a whopping $6,630,863 against operators of BoostMyScore(BMS). The FTC alleged BMS guaranteed consumers they could ‘piggyback’ on another unrelated person’s good credit in exchange for fees ranging from $325 to $4000. This scheme is designed to artificially inflate the credit score of a person with bad credit.
According to the FTC complaint, BMS made unwarranted promises in various advertisements indicating that consumers’ credit scores would increase anywhere from 100 to 120 points within two to six weeks.
“Good credit isn’t for sale,” FTC’s Andrew Smith told media outlets. “This (BMS) company charged people thousands of dollars based on hollow promises that ‘piggybacking’ on a stranger’s good credit would raise their credit score or help them get a mortgage.”
“They almost act like online companies that set up blind dates,” said John Ulzheimer. Ulzheimer is a credit expert who previously worked for the credit scoring company FICO.
“The reality is making the person an authorized user is a sham,” said attorney Gregory Ashe.
“The person with a low credit score is not truly an authorized user; they can’t charge anything on the card. So they would be artificially raising the score, not accurately reflecting their creditworthiness, and actual ability to pay their bills if it worked,” Ashe explained.
FICO is well-informed and trained about people with good credit being paid to allow strangers to piggyback on their credit.
To disrupt the practice, FICO has taken serious steps to thwart the corrupt procedures by disallowing paid authorized user accounts to raise the credit score of other unknown people.
How To Avoid Credit Repair Scams in 2021
The FTC recommends the following information for consumers to determine if they’re dealing with a legit credit repair/debt counseling service or a fake one.
- Credit repair or debt counseling service insists you pay them upfront before they do any work.
- A credit repair representative tells you to dispute information in your credit report even if you know the information is accurate.
- A representative tells you not to contact the credit reporting bureaus directly.
- You’re told to give false information on your applications for credit or a loan.
- A representative doesn’t explain your legal rights when they tell you what they can do for you.
Beware Promises of a “New Credit Identity”
Any credit repair company that offers a “new credit identity” claiming the new identity can help hide bad credit history or bankruptcy for a fee is telling a lie. This shady practice can jeopardize the chances of obtaining good credit in the future and consumers can fall into the hands of the law.
If a person pays for these illegal services the credit agent provides the payee with a nine-digit number similar to a Social Security number. It is called a CPN (credit profile number or credit privacy number).
Or, for instance, a rep may direct a consumer to apply for an EIN(Employer Identification Number) from the Internal Revenue Service(IRS). EINs are legal numbers, typically used by businesses to report financial information to the IRS and to the SSA (Social Security Administration.)
Overall, keep in mind: an EIN is not a substitute for your Social Security number.
Credit repair companies may tell a person to apply for credit using the CPN or EIN, rather than their own Social Security number, and they will lie and say the process is legal. Don’t believe it. It’s a scam! These unscrupulous companies could be selling stolen Social Security numbers, taken most likely from children or deceased individuals.
A warning to anyone who uses a stolen identity number and represents it as their own: the crooks have involved you in identity theft, a felony criminal offense.
You could find yourself in deep trouble because it is a federal crime to:
- Make false statements on a credit or loan application
- Use someone’s else Social Security number
- Obtain an EIN number from the IRS under false pretenses
- Creating and using CPN’s to hide behind your true identity
Ultimately, the tactics listed above don’t work too well.
Somehow, if a CPN has not been associated with your credit report, the credit bureaus treat you as if you do not have a credit history. Without a documented track record this undermines your chances of building a strong credit score. Besides the criminal liability, your fraudulent activity could make any debt you incur by these questionable methods not dischargeable in bankruptcy. Therefore, if you declare bankruptcy, the debts will remain fraudulent on your credit report and creditors can still pursue you for what you owe.
DIY Credit Repair? Or Free Debt Counseling
Many people want to avoid paying credit repair services to fix the possible false negative items in their credit reports or hire debt counselors to fight a battle with the credit bureaus over charge offs, expired judgements and liens that shouldn’t be on the credit report, or accurate items that continue to keep pushing down the credit score.
There are far too many fraudulent practices in the credit repair industry that don’t increase scores to give a person good credit. Do-it-yourself credit repair or free debt-counseling organizations just might be the best option, providing you don’t fall for the ‘okie doke’ and pay a repair service thousands of dollars for a service you can do yourself by following careful instructions.
Here are a few helpful links to get started to do your own credit repair free of charge or if you decide to seek free debt counseling there is an included link to those services as well:
Another option is to enroll in an alternate credit score program like Experian Boost or UltraFico. These programs track not only your credit history, but also other indicators of financial responsibility, such as bank deposits or utility payments.
Top Best Credit Repair Services in 2021
Prior to Hiring a Credit Repair Agency, Investigate First By Asking Questions:
- What does the company mean by ‘credit repair’?
- Have the agency to write a contract indicating what they can or cannot do with your credit report
- Explain credit repair federal laws including the fact their company doesn’t engage in any illegal activities
Has the company negotiated or reached settlements with your creditors or others?
How long does it take?
How will you know if the creditors have agreed to a settlement?
- What is the cost?
- Once errors are found on your credit report, how often does it update you on the progress of negotiations?
- Ask about your three day right to cancel without any charge
- How accessible is the staff of the company?
- How can you register complaints or resolve disputes with the company about its services?
Contact Federal Trade Commission(FTC) to report problems with credit repair companies at: FTC.gov/complaint or call 1-877-FTC-HELP
Fixing and restoring good credit takes time and discipline. Prominent credit repair companies who follow the law do not engage in making “quick fix” promises, advise you to make false claims or use false Social Security numbers etc. Research credit repair companies carefully including debt counselors too. If you track down a trustable repair service, heed the advice of the agent helping you.
Meanwhile, remain vigilant, avoid the credit report scams, rebuild your credit the right way, and reap the rewards of good credit.
You won’t regret it.
Finance Reporter Clarence Walker can be reached at: [email protected]