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How to Identify Credit Repair Scams

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Having a bad credit rating is a tough situation to be in. Obtaining any sort of financial help with a low credit rating has become a tough task too. The problem has only worsened after the financial crisis of 2008 as banks and other financial institutions now put strict limitations before approving individuals. It comes as little surprise then that Americans who are faced with low credit ratings tend to look for solutions to fix this nagging issue. However, while credit repair in itself is not illegal (there are government approved organizations to perform that task), many individuals tend to look for the easy way out which in turn makes them vulnerable to credit repair scams.   Below are a few helpful tips to help you avoid becoming a victim of a credit repair scam.

  1. Demanding for Payment before the Service has been Provided:

One of the most common scams that illegally functioning credit repair organizations do is ask for payment before the credit repair service has been provided. Most people fall for this trap as the amount of the payment is not necessarily significant enough to make it sound like a scam. Thus, the company or group of individuals functioning illegally get away with the crime. However, under US Federal Law, credit repair companies cannot ask their clients to make payments until they have provided the promised services. Therefore, it is important to remember that no matter how small the payment is, a credit repair organization asking for any sort of payment in advance is bound to be a scam.

  1. Promising a Clean Slate:

While credit repairs do help push your credit ratings up, the damage that is repaired cannot be a clean slate. Credit repairing organizations functioning illegally that promise a second chance or a clean slate are simply trying to scam you. Moreover, some credit repairing organizations tend to take the whole ‘clean slate’ process to a whole new level by asking you to get rid of your Social Security Number altogether. This particular scam requires the individual to apply for an Employment Identification Number that can be used in place of the regular Social Security Number. Again, an organization complying with Federal Law cannot change your social security number as anybody misrepresenting his or her Social Security Number under a false pretense is violating US Federal Law.

  1. Operating Without Proper Licensing and Bonding:

The US Federal Law requires all Credit Repairing Firms to obtain a license to operate before starting off with their operations. Moreover, licensed organizations must follow proper bonding requirements. While different States in the US have different licensing and bonding laws, all the States have laws they must follow. Organizations operating without a license are fraudulent and must be avoided.   To find out more about credit repair scams and credit repair in general, watch what Jason Kaplan from The Credit Pros:

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