Avoiding Credit Repair Scams
Learn how to spot fraudulent credit repair companies.
By: Shannon Petrie
Under today's tight lending standards, excellent credit is vital for getting a loan with the best interest rates and terms. No wonder so many prospective homebuyers are looking for ways to clean up their credit. Unfortunately, some unscrupulous companies are taking advantage of consumers during the current credit crisis.
Credit repair companies often advertise on the radio, on television, in newspapers and on the Internet, claiming to be able to improve your credit record, usually for a hefty fee. Many of these companies are scams and will do you more harm than good.
Before you do business with a credit repair company, check them out at the Better Business Bureau. In general, beware of credit repair companies that:
- Ask you to pay for services upfront.
- Recommend that you don't contact a credit bureau directly.
- Don't tell you your legal rights. By law, credit repair companies are required to give you a copy of your consumer rights, a detailed written contract and three business days to cancel the contract from when it was signed.
- Promise to erase all of the negative information on your credit history. If the derogatory information is accurate and timely, only the creditor who reported it can remove it. Credit repair companies that offer to wipe your credit history clean are actually disputing all of the negative information on your report. Credit reporting bureaus must investigate these disputes within 30 days. If they verify that the information is correct, it stays on your report; if not, the information is removed. But while the information is being disputed, it's temporarily removed from your credit history, making your history look spotless even if it's not.
- Offer you a new social security number. The Social Security Administration hardly ever gives out new social security numbers, even to people who have had their numbers stolen. What the credit repair company is actually doing is filing a new EIN, a nine-digit employer identification number used to identify companies to the IRS. This practice is called "file segregation" and is illegal -- you might be accused of committing bank fraud if you use an EIN on a loan application.
Instead of turning to fishy credit repair companies, there are several things you can do on your own to improve your credit that are more effective and much easier on your wallet. Take these steps toward getting your credit in shape:
- Contact credit bureaus. You can request a free credit report once every 12 months from AnnualCreditReport.com. Inspect your report for errors, such as incorrect balances and accounts you don't recognize. Correcting these errors should boost your score immediately.
- Add an explanation to your report. If you had a good reason for not paying your bills on time, such as a job loss or a legitimate dispute, you can send the credit bureau a 100-word statement to include in your file.
- Get credit counseling. Get in touch with Consumer Credit Counseling Services, a non-profit organization that offers personal finance education and credit counseling for free or at a low cost.
Check Out Your Friend's Credit
If you are buying a home jointly with someone else, your credit score may not be the one the lender looks at.
Maintaining Good Credit After Buying a Home
It's important to maintain good credit even after you buy a home. Here's how to do it.
7 Surefire Ways to Improve Your Credit Score
You've already heard the bad news. The housing crisis has tightened up credit markets, and it's harder to qualify for a mortgage loan. Credit scoring has always been an important part of the loan approval process, but suddenly it bears more weight than ever.
Give Your Credit Score a Not-So-Extreme Makeover
No matter what your numbers are, they can almost always be better. Improve your credit score with these quick financial fixes.
How to Recession-Proof Your Home Purchase
First-time homebuyers, word to the wise: Look for attributes that add value to your new home to help combat falling prices. Here, basic guidelines to follow.
Provide Easy Access For Showings
Opening up beyond the open house.
How to Make an Offer for a House
Making an offer on a house isn't a total roll of the dice. There are some basic steps you and your Realtor can take to arrive at a price range and other terms that make sense.
Real Estate Survival Guide: Buyer's Checklist
Refer to this 10-step checklist to get you through the homebuying process.
Protecting Your Home & Finances in Tough Times
4 steps to take to weather a recession.
Pricing Your Home to Sell
Follow these tips for pricing your home correctly in a competitive market.
Found a living space you love in HGTV's Photo Library? Get the look in your own home with products from Wayfair.
Photo Friday: Cooking and Dining in the Great Outdoors
HGTV Design Blog – Design Happens Aug 28, 2015 by Beth Rucker
This or That: Pick Your Favorite Vintage Find From Fixer Upper
HGTV Design Blog – Design Happens Aug 27, 2015 by Farima Alavi
6 Essentials for the Perfect Tailgate Party + Win the 1 Thing You Really Need
HGTV Design Blog – Design Happens Aug 25, 2015 by Farima Alavi
Discover the Winning Hue in Our Color Vs. Color Competition!
HGTV Design Blog – Design Happens Aug 24, 2015 by Kayla Kitts
Copy This Room: Get Beach Flip Style in Your Living Room
HGTV Design Blog – Design Happens Aug 24, 2015 by Shannon Petrie
4 Ways to Personalize Your Dorm Desk + College Goodie Giveaway!
HGTV Design Blog – Design Happens Aug 21, 2015 by Farima Alavi
The Easiest (and Cutest!) DIY Dorm Roommate Mugs Ever
HGTV Design Blog – Design Happens Aug 20, 2015 by Marianne Canada