Credit Repair

Red Flags to Watch Out for When Signing Up for a Credit Repair Service

You almost always need a good credit score to perform some basic life tasks, like renting an apartment, applying for a loan, getting a phone, and so on. With bad credit, life can be hell, and it is during this time that you are likely to make a bad decision out of desperation. One huge mistake you can make is working with a shady credit repair company.

What does a credit repair company do?

Credit repair companies work with the credit bureaus and your creditors in an aim to take all the negative items out of your credit reports. Your credit score will improve only when your credit reports are cleaned up. 

The process of cleaning your credit reports starts with your credit repair company contacting credit bureaus to dispute any errors in your credit reports. They may also negotiate an agreement of “pay to delete” with your creditors, which means that you will pay the balance of your debt in exchange for the removal of the account tradeline in your reports.

The sad truth is that not all credit repair companies do business lawfully. Some fail to deliver on their promises, and some would take your money and simply disappear. 

Below are some of the things you should consider signs that the credit repair agency you are dealing with is a scam:

a. They promise to remove all negative information from your reports including the accurate ones. Your right as a consumer is to dispute any inaccurate information on your credit reports. But if the information on your reports is true, like if the outstanding balance and payment status are accurate, there is no way the credit bureaus will agree to remove them from your credit reports.

b. They suggest making you a new credit identity. File segregation is a very common strategy used by fraudulent credit repair companies. What they do is apply for a new Employer Identification Number, which you can use on new credit applications. You will use this new number instead of your Social Security Number. This might work at the start, but in the long run, this could make your situation worse.

c. They do not even try to interview you. Legitimate credit repair professionals will make an effort to talk to you personally to get a good understanding of your situation. Fraudulent agencies, on the other hand, wouldn’t bother interviewing you. They will send generic letters to your creditors, which are not likely to reflect your real circumstances.

d. They ask you to pay upfront. Credit repair companies are prohibited from demanding customers to pay upfront. You are required to pay for credit repair services once you have come through on whatever services are outlined in your contract.

Before you sign any agreement with a credit repair service, make sure you look into the company’s background. Check its licenses and read a couple of customer reviews as well. Doing these things will increase your chances of finding a reputable and professional credit repair company.