Credit Repair Scams

People hire credit repair companies to help them investigate mistakes on their credit reports and assist in removing inaccurately reported negative items that can affect their credit reports and credit scores. Credit repair companies must conduct their business by following a strict set of rules, and they can’t remove negative information that is accurate and timely from your credit report.

The Credit Repair Organizations Act (CROA) ensures that potential buyers of credit repair services are provided accurate information before making a purchase.

In general, CROA prohibits credit repair companies from displaying misleading or false advertising about their services. CROA also prohibits credit repair companies from demanding payment for services in advance, meaning the credit repair company must first provide work on behalf of the client before billing them. CROA also requires that credit repair companies provide their clients with a written contract outlining their services, as well as giving their clients the option to cancel their services.

At the time of signing, credit repair companies must provide a disclosure that informs you of your rights to order your credit reports, to dispute the accuracy of the information in your credit reports yourself, and to sue a credit repair organization that violates CROA. This disclosure must be separate from the contract given to you and requires your signature.

It’s illegal for credit repair companies to lie about what they can do for you or charge you before they help you. Any contract provided by a credit repair company must explicitly state the terms of your payments, all services that will be provided, the length of time in which the service will be completed, a physical address for the company, and information about how to cancel the company’s services. As long as you cancel within three business days of signing your contract, no credit repair agency should be able to charge you any fees or penalties for canceling their services. This policy should be clearly stated in the contract they provided at the time of signing.

How to Identify a Credit Repair Scammer

Knowing your rights under the CROA can be an effective tool for helping identify the difference between a legitimate credit repair organization and a credit repair scam. Look for these signs of a credit repair scammer:

• They guarantee results. Under CROA, credit repair companies cannot guarantee results. Here are a few common examples of false promises unethical credit repair companies might make:
  • Improvement to your credit score
  • Results in a fixed time period
  • Removal of all negative items, even if they are accurate
• They ask you to misrepresent information. This can range from unlawfully using an Employer Identification Number (EIN), Federal Tax Identification Number, or Credit Profile Number (CPN) in place of your Social Security Number (SSN) to claiming you are a victim of identity theft when you are not.
• They claim a new identity is needed. A credit repair company can’t promise or offer you a new identity. Anyone offering you a new identity is a fraud. Besides guaranteeing results, scammers may try to promise you a clean slate with a new EIN or CPN. They tell you to use these numbers on your future credit applications instead of your SSN.
• They don’t explain your legal rights. There are a few common things an unethical credit repair company might do:
  • Tell you not to contact the credit bureaus directly
  • Not give you a copy of the contract to review before signing
  • Fail to inform you that you can repair your credit yourself without the help of a credit repair company
  • Leave out important information from the contract, like the date services will be executed, the amount you will pay, or your cancellation rights
• They request up-front payment. The CROA prohibits credit repair companies from requiring payment before services are rendered.

Common Credit Repair Schemes

• File segregation is when a company or individual offers to give you an EIN to use in place of your SSN when you apply for credit. It’s illegal for companies to do this, and it’s illegal for consumers to obtain one to use in place of their SSN.
• Tradeline renting is when you pay for authorized user or secondary account holder status on a credit card allowing the tradeline to show up on your credit reports. This doesn’t repair any negative information on your credit but adding a positive tradeline to your credit report can boost your score. There is nothing wrong with a loved one adding you as an authorized user. However, if you pay to “rent” a tradeline from a stranger, you don’t know how it will impact your credit and it may be a scam to get your money. 
• Credit privacy numbers/credit profile numbers/credit protection numbers (CPN) are nine-digit numbers formatted just like an SSN. Scammers sell CPNs to consumers to use in place of their SSN when applying for credit as a way to hide a bad credit history or bankruptcy. While SSNs are issued for free, scammers will charge you money for a CPN — sometimes thousands of dollars. They may tell you to provide false information (such as a different address, phone number or email address) when you fill out credit applications using the CPN. Often, they'll pretend this is a way to protect your identity — but they're really directing you to create a false identity. Using a CPN can lead to much bigger problems than a poor credit rating. No matter how the CPN is obtained, using it on a credit application or anywhere else may be considered identity theft. In addition, lying on a credit or loan application or misrepresenting your SSN is a federal crime.

File a Complaint

Report suspected credit repair scams to the Florida Department of Agriculture and Consumer Services by filing a complaint at FloridaConsumerHelp.com.