Are credit repair companies legit with their business conduct? Generally, no. Some credit repair companies are outright scams that take your money and give you nothing in return. Others may first appear legitimate but also tend to generate a lot of unhappy customers because their service doesn’t live up to their marketing. If you’re considering using a credit repair company, our advice is don’t. Credit repair companies are different from reputable, non-profit “credit counselors.”
What’s the Difference Between a Credit Repair Company and a Credit Counselor?
A credit repair company is a business that promises to help you “fix your credit” in various ways – from arranging loans to disputing items on your credit report. Credit counselors are non-profit organizations that help you by providing advice about managing money and debt.
What are Credit Repair Scams?
Credit repair scams occur when “credit repair companies” take advantage of people’s debts to swindle money. These companies may disguise themselves as credit counselors and ask for personal information to help you apply for “loans.” They’ll make unrealistic promises such as clearing your credit free of debt or completely removing accurate negative credit information on your credit report. Unfortunately, credit repair scams can leave you with even more financial insecurity and can even cause you to experience legal trouble – such scams sometimes lie to creditors and credit reporting agencies.
Simply put, there’s no such thing as the complete removal of debt or negative credit information. You can certainly dispute your credit report, but credit counselors are legally only allowed to assist you with this process. If a “credit counselor” is approaching you with claims of complete debt relief, it’s likely a scam.
Finding a Reputable Credit Counselor
To be clear, there are such things as credit counselors. Legitimate credit counselors are likely to be members of professional associations such as the Financial Counseling Association of America or the National Foundation for Credit Counselling. The most prominent financial counseling organization in Maryland is CCCSMD.
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Identifying Credit Repair Scams
To protect yourself from potential credit repair scams, it’s important to recognize the signs of a dishonest business. Here are some signs of a credit repair scam:
- Unrealistic promises of negative credit report removals and/or debt removal on accounts that you actually owe
- Demanding upfront payments
- If you’re in Maryland, the failure to hold a Maryland Credit Services Business license (you can search here)
- Avoidance and/or refusal to state your rights
- Discouraging you to contact credit reporting agencies yourself
- Lack of transparency/extreme secrecy about their company methods
- Insistence on using your personal information to continue moving forward with their services
Understand Your Rights
It’s important to remember you have consumer rights. You have the right to dispute your credit reports under the Fair Credit Reporting Act. If you have false information on your credit report, you’ll probably do a better job disputing it yourself than by hiring a credit repair company (but watch out for these five mistakes). If you’ve had financial problems and your credit report looks bad, with lots of debts that you actually owe, you should be looking for a credit counselor, not a credit repair company.
At The Holland Law Firm, we believe you have the right to understand your credit report and defend yourself against fraudulent practices. If you’ve been the victim of a credit repair scam, don’t hesitate to meet with a consumer protection lawyer. Schedule a consultation with one of our experienced attorneys.