By now, you must have come across a lot of advertisements that proclaim to get you a brand new credit identity. In other words, these are some of those rare opportunities where you could begin afresh as far as getting rid of your malaised credit history is concerned in exchange for a good, healthy-looking one.
No matter how good these ads from the so-called credit repair companies may appear, in reality, they’re nothing more than a scam. More, working with them will not only disqualify you for further credit, but you could even land up in jail or pay hefty fines for that.
What are the signs of a fraudulent credit repair company?
You should stay away from those credit repair companies that ask you to:
- avoid getting in touch with the credit reporting companies on your own.
- pay them much ahead of providing you with any sort of fruitful credit repair service.
- ignore the legal rights that you’re entitled to as a consumer when you negotiate to get credit repair help from them.
- provide fake information on your loan applications.
- dispute a credit information mentioned in your credit report, even if it is true and authentic.
How to identify too good to be true ads
Credit repair companies that promises to get you a new credit identity will claim that they can assist you to conceal your bad credit history and even bankruptcy in return for a fee. As part of the program to repair your credit, these companies will give you a nine-digit number that would look just like a Social Security number.
They usually refer to such numbers as CPN that could be an abbreviation of ‘credit privacy number’ or ‘credit profile number’. Or else, they may request you to apply for an EIN (Employee Identification Number) from the Internal Revenue Service (IRS). Though EIN’s are valid numbers, mainly used by businesses in order to report all sorts of financial information to the Social Security Administration and the IRS, yet they aren’t a substitute for your Social Security number.
After that, your credit repair company may ask you to apply for fresh loans by either using the EIN or CPN, instead of your Social Security number. What is more unfortunate that the credit repair company may tell you that it is a legal process, while in reality, it’s a scam. Companies like these may sell ill-gotten Social Security numbers, usually obtained from children. So, by using such illicit numbers as your own, these con artists may get you involved in an identity theft racket.
In case, you blindly follow all the instructions of a credit repair company and commit fraudulent activities, then you may find yourself convicted of a federal crime. This could put you into serious legal trouble. Generally, it is considered a federal crime, if you happen to commit the following:
- lying on a credit or loan application
- misrepresenting facts like your Social Security number
- obtaining an EIN from the IRS on illicit pretexts
The fact is that if you take advantage of the number sold by these companies, then you could be fined or face imprisonment.
Where do you report credit repair fraud?
Here are some of the avenues where you could lodge a complaint against any credit repair company:
Federal Trade Commission (FTC) – You may lodge a complaint with the FTC. Primarily, the FTC doesn’t resolve individual credit repair complaints, however, it does take action against a company, if it identifies that there has been a series of instances of law violations by that company. You may lodge your complaint at its online window ftc.gov/complaint or even call them up over at 1-877-FTC-HELP.
State Attorneys General (AG) – A lot of states have their own laws to regulate these credit repair companies. So, if you encounter any problem or get victimized by a credit repair company, then you can report about that to your local consumer affairs office or to the state’s Attorney General (AG).
Finally, your best defense against credit repair scams would be to research well about your rights under the Credit Repair Organizations Act (CROA) and to exercise your own discretion at all times.