You see all of the ads on TV and in print. Fix your credit problems, improve your credit score, and they show an 800 number and give a website for more information. Are these programs legitimate or are they frauds? Here are the facts that everyone needs to know.
The first thing to know is the difference between a legitimate credit counseling agency and a scam. A credit counseling agency is usually non-profit. In addition, a legitimate credit counseling agency will not promise to fix credit problems and improve your credit score. Instead, they will give you sound advice on how to manage your money, pay bills on time, and decrease debt service. A legitimate credit counseling agency will not ask for money upfront. Many banks and credit unions offer free credit counseling services.
In comparison, scams usually make incredible promises. They ask for a monthly fee plus an upfront fee. These fees are expensive. Here is how to tell if it is a scam, even if they are non-profit. Check with the local State Attorney General's Office and ask them if there are any complaints against the company you are considering. Then check with the BBB (Better Business Bureau). Once that is done and you are satisfied that the company is legitimate here are some points to consider before you shell out your hard earned money on one of these services.
How Can I Tell if it is a Scam?
Find out exactly what services the company is offering you. Changing social security numbers or obtaining an EIN (Employee Identification Number) for the purpose of starting a new credit file is illegal and it can be considered fraudulent by lenders if you secure a loan using these documents. If this is part of the services offered, it is a scam.
Piggybacking on someone else's credit card is legal. However, due to the fact that this was abused by many companies touting instant credit repair, it no longer counts toward your credit score unless you are also a joint borrower, not just an authorized user. It is a questionable practice. Most legitimate firms do not offer this. Originally, this was to help young adults or a spouse establish credit by being listed on a credit card as an authorized user. Now, due to abuse, it is no longer helpful.
A scam will always ask for money upfront and they will usually make outrageous claims. A company that offers guaranteed increase in credit scores or instant credit score improvement should be considered as a scam. Never sign up for a credit repair service on the advice of a realtor who is trying to get you into a home. Most of these services are questionable and should be avoided. Not all realtors understand these services and some are making recommendations to questionable companies.
What is a Legitimate Credit Repair Company?
A legitimate credit repair company is usually through bank, credit union, or government agency. They are always nonprofit. A legitimate company is actually a credit counseling service not a credit repair service. They will work with you to help you development money management and credit management skills that will slowly improve your financial status over time. Instant repair will never be mentioned. Their fees if any are very reasonable and it is usually a small one time charge, not an upfront fee and then recurring monthly fees.
A little research and time spent will help you find the right credit counselor for your needs. Be sure you understand all of the items on a contract before you sign any agreement. If you have doubts, consult your attorney. Think it is a scam, report them to the State Attorney General's Office. Most have a consumer fraud division just for this purpose. Remember when it comes to credit repair - buyer beware.
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