Be leery if you are tempted to contact a credit-repair company. The Federal Trade Commission and several attorneys general have sued credit-repair companies for falsely promising to remove bad information from credit reports. Here are tips to follow:
Contact the Attorney General's Consumer Protection Hotline at 800-392-8222 to check for complaints made against a company.
Avoid companies that tell you truthful information can be changed or erased to improve your credit or that only the credit-repair company can remove old or inaccurate information. These claims are false.
Be wary if you are asked for a large sum of money before the credit-repair company completes the job. A money-back guarantee will not protect you from a disreputable company.
Avoid new credit identities
If you have filed for bankruptcy, you may be the target of a credit-repair scheme, often called "file segregation." Here, you are promised a chance to hide unfavorable credit information by establishing a new credit identity.
However, there is a problem: File segregation is illegal. If you use it, you could face fines or imprisonment.
Other scams
Consumers looking for an easy fix often are targets of other credit-related scams:
Credit by phone: Pay-per-call or 900-number services have become a popular vehicle for credit scams. Advertisements promise that "guaranteed" credit or cash loans are only a phone call away. Instead, the caller might only receive a list of banks offering low-interest credit cards or a booklet on how to establish credit — and a phone charge of $50 or more. Consumers rarely end up getting credit.
Gold or platinum cards: Beware of promotions for gold or platinum cards that promise to get you credit and build your rating. Although they may sound like all-purpose credit cards, some cards only permit you to buy merchandise from special catalogs and will not help you obtain other credit. You also might be asked to call a 900 or 976 exchange number for more information. These phone charges add up quickly.
Checking-account scam: This scam, which tricks you into disclosing your checking-account number, typically begins with a postcard advertising easy credit approval or low-interest credit card rates. When you call, you are asked for your checking-account number as "verification." Your number then can be magnetically encoded on a draft, which is forwarded to your unsuspecting bank for payment from your account.
Contact the Attorney General's Consumer Protection Hotline at 800-392-8222 to check for complaints made against a company.
Avoid companies that tell you truthful information can be changed or erased to improve your credit or that only the credit-repair company can remove old or inaccurate information. These claims are false.
Be wary if you are asked for a large sum of money before the credit-repair company completes the job. A money-back guarantee will not protect you from a disreputable company.
Avoid new credit identities
If you have filed for bankruptcy, you may be the target of a credit-repair scheme, often called "file segregation." Here, you are promised a chance to hide unfavorable credit information by establishing a new credit identity.
However, there is a problem: File segregation is illegal. If you use it, you could face fines or imprisonment.
Other scams
Consumers looking for an easy fix often are targets of other credit-related scams:
Credit by phone: Pay-per-call or 900-number services have become a popular vehicle for credit scams. Advertisements promise that "guaranteed" credit or cash loans are only a phone call away. Instead, the caller might only receive a list of banks offering low-interest credit cards or a booklet on how to establish credit — and a phone charge of $50 or more. Consumers rarely end up getting credit.
Gold or platinum cards: Beware of promotions for gold or platinum cards that promise to get you credit and build your rating. Although they may sound like all-purpose credit cards, some cards only permit you to buy merchandise from special catalogs and will not help you obtain other credit. You also might be asked to call a 900 or 976 exchange number for more information. These phone charges add up quickly.
Checking-account scam: This scam, which tricks you into disclosing your checking-account number, typically begins with a postcard advertising easy credit approval or low-interest credit card rates. When you call, you are asked for your checking-account number as "verification." Your number then can be magnetically encoded on a draft, which is forwarded to your unsuspecting bank for payment from your account.
