How to Protect Yourself from Credit-Repair Scams
Equifax Credit Team
If you’re drowning in debt, you might be tempted to partner with a debt-relief service or a credit-repair company to help you pay down your debt. In recent years, some companies have preyed on consumers’ financial insecurities, prompting the federal government to get involved by passing new laws regulating the industry.
Credit-repair companies promise to restructure your debt or settle with creditors on your behalf to change the amount you owe. They may also offer budget counseling or classes, or create a debt-management plan for you.
New Federal Trade Commission regulations require that these companies be clearer with customers about what they can do, how long it will take, and how much the customer may or may not save.
The FTC regulations also make it illegal for such companies to charge a fee before they are successful in helping a customer with his or her debt.
Keep in mind that these rules apply only to companies offering services by phone or over the Internet. If you meet with a company face-to-face before signing up, these new rules do not apply.
How Can You Protect Yourself?
Before you get involved with a credit-repair company, ask your state attorney general or Better Business Bureau if any complaints have been filed against the company.
You can also check with your state attorney general’s office to see if the company has a valid license. Remember: just because a company claims to be a nonprofit organization, it doesn’t mean it is.
A reputable credit counseling agency should provide you information without requiring you to provide money or details about your situation. The company should tell you your rights and what you can do for yourself for free.
Ask how the company will handle your sensitive financial information to make sure it stays private.
Finally, be sure it is clear how much you are expected to pay the company, and get that number in writing.
Credit-Repair Scam Red Flags
Be cautious if the credit-repair company
- Asks for money before offering any services. If the company asks for money up front, just walk away.
- Makes guarantees and promises that seem too good to be true. No one can correct inaccuracies on your credit report or make your debt disappear over night.
- Tells you it can change information on your credit report. A credit-reporting company can help you remove inaccurate information from your credit report. But it cannot change the truth on your report, so be wary if a company says it can.
- Requires payment of monthly service fees or of a substantial percentage of the money you save.
- Tells you to pay the company instead of making direct payments to your creditors.
- Asks you to apply for an employer identification number (EIN) to use instead of your Social Security number. You can’t invent a new credit identity. If the company asks you to do this, walk away.
To file a complaint or ask questions, visit ftc.gov, or call toll-free at 1-877-FTC-HELP.
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.