Every day, consumers pay untold sums to companies that promise a quick credit fix. Most of the time, that money is wasted.
While there are some legitimate credit-repair companies, many of the claims you hear advertised are false and a con to get your cash.
On my XM radio show, a couple called in to ask whether they had done the right thing in signing up with a company that said it could remove negative information from their credit files.
The negative information was correct. It included, among other things, a bankruptcy filing by the couple about five years ago.
The couple hired the company, agreeing to pay $200 up front. And they agreed to allow $100 to be withdrawn from their bank account each month for ongoing efforts to fix their credit.
The so-called credit-repair company wasn’t doing anything for them that they couldn’t do for themselves.
There were several signs of trouble.
The first was the upfront fee. Under the federal Credit Repair Organizations Act, it is illegal for companies to charge consumers money before performing the promised services.
Next, the company said it could permanently delete accurate, negative information from the couple’s credit files.
That’s a lie.
While you can dispute information in your files that you believe to be false, no credit-repair company or individual has the right to remove accurate, current information. If the information in your file is correct, only the passage of time can reduce the impact of a negative report. Don’t despair, though. The impact of that information on your credit scores is less as the years go by.
If you’re thinking about responding to a credit-repair offer, you should avoid any firm using these terms:
An upfront fee.
The company says it will dispute all information in your file, including things you know are correct.
Before you sign a contract, the company does not provide you with a copy of the FTC’s “Consumer Credit File Rights Under State and Federal Law,” which outlines what is permissible.
You are told not to directly contact the credit reporting agencies.
You are told that the company can get you a new credit identity by applying for an employer identification number, or EIN, from the IRS. The pitch is that you can use this number instead of your Social Security number. If you don’t own a business, this is not a legitimate route.
It is a federal crime to obtain an EIN under false pretenses.
If you have some credit issues, the best thing to do is to go online to and get the free publication “Credit Repair: Self Help May Be Best.” You can also call toll-free 877-382-4357.
Michelle Singletary: singletarym@washpost.com
