6 warning signs for credit repair service scams

Posted on: 7 July 2017

If you don't have any pressing financial needs but want to improve your credit, it can be tempting to turn to a credit repair company to raise your credit score. However, as with all financial services for people with a bad credit history, you have to be on red alert for scams.

So… what do credit repair services actually do?

Credit repair companies can help you repair your credit, but only in very limited ways. The standard procedure for credit repair companies is to go through your credit record and try to identify any items they think are inaccurate or obsolete. An inaccurate charge is one where the item on your credit record has an incorrect amount, was actually paid rather than unpaid, or was reported as yours when it was actually another person's. An obsolete charge is one that is older than 7 years which is still being reported.

For some people, these services can help! Financial companies' record keepers aren't perfect, and will often get things wrong; it's not unheard of to have someone else's defaulted loan mistakenly assigned to your credit report, or for a company to continue reporting a default when you've paid off the loan.

The most important rule for our readers to keep in mind when going through their credit reports is that some companies might still be reporting old debt, which by law shouldn't be on your credit report after 7 years. You have the right to dispute these bad credit items on your report, and a reputable credit repair agency will do it for you.

Are credit repair companies scams?

While there are reputable credit repair services out there, the unfortunate truth is that many companies who advertise credit repair services are scams focused on making money without helping you. On June 27, 2017, four credit repair companies got in trouble with the Consumer Finance Protection Bureau (CPFB) for misleading business practices and scams. They charged very high fees up front, monthly subscription fees with misleading money-back guarantees and even used fake testimonials to mislead customers.

If you’re thinking about hiring a credit repair firm, it's important to remember that you will never have to pay money before they begin the services. Legitimate credit repair services are only allowed to charge money if they confirm that they've improved your credit scores. If they are telemarketing companies, they have to show that they’ve improved your credit score a minimum of six months after you’ve engaged their service.

Warning signs of a credit repair scam include:

  • They charge fees up front: A simple rule is to never pay up front. Beware of monthly subscription fees! Many scams will also try to rope you into paying a monthly subscription fee that you have to tell them to cancel.
  • They try to guarantee a credit score gain: Offering a guaranteed point increase isn’t possible because no one can remove accurate and up-to-date information from your credit report.
  • They tell you not to talk to a credit reporting company: No legitimate credit repair company will do this.
  • They don’t or won’t tell you what you can do for free: People can obtain a detailed credit report for very low cost, and often get a credit report for free. In addition, you can file disputes without the help of a credit repair agency.
  • They won’t tell you how you can cancel: By law you have the right to cancel, free of charge, any contract for credit repair up to three business days after you sign.
  • They call you, you don’t call them: While it's not illegal to contact you through telemarketing, you should always be suspicious of any credit repair agency that cold calls to sell you their service. Instead, you can find a reputable credit repair company through a list of government approved credit counselors.

For more information on credit repair scams, you can also take a look at the CPFB’s guide.

How can I improve my credit score without hiring credit repair services?

If you don't have any inaccurate or out dated charges on your credit score, the best way to improve your credit score is to pay off your existing debt or build a history of consistent debt payments.

But… you need to get credit to build credit, and getting credit when you have bad credit isn’t so easy.

That’s why at Fig we’re excited to announce the launch of our new Credit Builder Loan which we designed in collaboration with the United Way of Greater Houston and TransUnion. Modeled after LISC’s Twin accounts program, the goal of the credit builder is to allow customers to make small monthly payments over the course of a year so they can build healthy credit with very little risk.

For example, if you take out a $500 credit builder loan with Fig, we put those funds in a trust for safekeeping. Then after you’ve made your monthly installment payments of $48, we give you the money back and you’ll see a considerable increase in your credit score because we’ve reported your on time payments to all 3 major credit bureaus!

You can apply for our credit builder loan here: www.figloans.com/credit-builder

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