Beware of Credit Repair

Oct. 20, 2008 — -- Later this week, the Federal Trade Commission and several state attorneys general will announce a major sweep of fraudulent "credit repair" firms. Consumer protection professionals all over the country say they are seeing an aggressive resurgence of the credit repair scheme right now because so many Americans are having credit problems in this tricky economy. Don't fall for it.

It's ironic. People who are too strapped to pay their bills somehow scrape together enough money to pay a credit repair company. Credit repair companies claim they can erase negative entries on your credit report -- even if those entries are accurate. Sorry, nobody can do that for you.

Now, if there are mistakes in your credit file, you can correct those yourself. But companies that claim they can purge accurate information from your file are operating illegally, and if you hire one, you could be breaking the law too.

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Tiffany D. heard an advertisement for credit repair on the radio. Her credit was a mess, so she was intrigued. When she called, the company told her it could almost instantly "clean up" her credit record. So Tiffany made a $450 down payment for the company's help.

A couple months later, she still couldn't get a loan to save her life. She got suspicious, put a hold on her bank account so the company wouldn't take out any more payments, and called me.

I sent a producer into the company undercover. He signed up to get his credit repaired. A few days later, the company sent him three sealed envelopes that he was supposed to forward to the major credit bureaus. Of course, we opened them first.

The company had written dispute letters claiming our producer had never made a late payment -- even though he had. The company wrote all sorts of other lies and then forged our producer's name at the bottom!