Sneaky Credit Repair Pitches: Don't Fall for Them

Oct. 12, 2009 — -- It's happened again. The Federal Trade Commission has once again cracked down on companies claiming to offer "credit repair" services.

The FTC says it has never seen a legitimate credit repair company and these latest are no exception.

What is exceptional is the manner in which these companies marketed themselves. Usually, credit repair firms advertise on late-night cable, on the radio, the Internet, in classified ads -- even on telephone poles.

In this case, the FTC alleges that the firms marketed their services at real estate investment seminars. In other words, people would go to these seminars thinking they were going to learn about how to make money in real estate (real estate seminars are another sketchy arena) and they would hear pitches for credit repair.

The FTC says the defendants claimed to have special relationships with creditors, collectors and the credit bureaus that enabled them to remove derogatory information from clients' credit reports. And here's the key: the defendants claimed they could remove unflattering information -- late payments, collections, repossessions -- from people's credit reports even if that information was true.

The FTC says it was all a lie. It's always a lie. And the firms always charge big bucks up front for their bogus service, which is illegal. These latest cases followed the same pattern.

It's insane. People who are too strapped to pay their bills somehow scrape together enough money to pay a credit repair company.

Credit repair companies use a couple different strategies. The first is known as "bombardment." They flood the credit bureaus with paperwork disputing every single item in your credit report. They try to take advantage of a law that says credit bureaus must drop an entry if it can't be verified within 30 days.      2. If a company asks you to pay for credit repair services up front, that's a bad omen, indeed, because it's illegal.

     3. Credit repair companies often discourage you from contacting the credit bureaus directly.

     4. If somebody suggests that you apply for an employer identification number and use that instead of your Social Security number when you apply for credit, that's a telltale sign of fraud.

     5. Credit repair scammers may advise you to dispute all the information in your credit report, even entries you know are true.     2. Consider disputing errors in your credit history yourself -- for free! Start by ordering your free credit reports from www.annualcreditreport.com. Then follow the simple instructions for disputing inaccuracies.

How to complain:

Since credit repair companies operate illegally, contact your state attorney general if you have been victimized. Also, file a complaint with the Federal Trade Commission, which does not resolve individual cases, but does investigate when it gets multiple complaints about a company.