If your credit card debt has been spiraling out of control, you might be thinking about paying a professional to help you repair the damage. You’re most likely feeling the pressure and would do anything in your power to relieve the discomfort. You might even be getting sick over it. In fact, the American Psychological Association’s 2015 Stress in America survey finds that financial strain can have a big impact on your health.
Although you may feel distressed, don’t let your delicate emotional state lead you into the arms of a scammer. This will make you a prime target since you won’t be able to think clearly about the financial decisions you’re making. “Being in debt is a terrible feeling and that can make you very vulnerable to credit repair scams. These companies know you’re in a vulnerable state of mind and they try to take advantage of you,” says Beverly Harzog, financial expert and author of The Debt Escape Plan: How to Free Yourself from Credit Card Balances, Boost Your Credit Score, and Live Debt-Free. Here are four signs that you’re dealing with a credit repair scam.
1. The company tells you it can remove any negative information
The only time information can be removed from your credit report is when the information is inaccurate. If the information is negative, but it is correct and it falls within the statute of limitations for credit reporting, then it will not be removed. For example, a bankruptcy will stay on your credit report for 10 years from the date of the filing. A delinquent account will remain on your credit report for seven years following the date of the last payment submission prior to the account falling into delinquency.
“And they often ‘guarantee’ they can fix your credit. … Companies who claim they can do this tend to claim they can fix your credit in 48 hours. No one can do that, either,” says Harzog.
2. You’re asked to build a different credit identity
It’s never OK to misrepresent your true identity. If the credit repair organization asks you to lie about your credit identity, this is a huge red flag. Do not acquiesce to this request. It is an act of fraud that should be reported to the Federal Trade Commission.
“This scam usually involves getting you to switch from your Social Security Number to using an Employer Identification Number. This results in a ‘new’ credit report. The problem with this is that it’s illegal because you’re misrepresenting who you are. If the company wants you to pay for their services before they’ve done the work, this is a bad sign. Federal law states that credit repair companies can’t ask you to pay for services before they’ve completed the services they’ve agreed to do,” says Harzog.
3. You’re charged a hefty upfront fee without an option to cancel
Another sign that something is awry is if the company charges you a large fee before services have been rendered, without the opportunity to cancel within three business days. You shouldn’t be locked in if you decide to change your mind about a service.
“The former is prohibited and the latter is required by law,” says Gerri Detweiler, director of consumer education at Credit.com and author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights. Detweiler says you should also be leery if identity theft paperwork is handed to you. Run away “if you are instructed to sign an identity theft affidavit even though you weren’t a victim of ID theft,” warns Detweiler.
4. You’re kept in the dark about your legal rights
Harzog says another sign that a credit repair organization is scamming you is if you have no idea what your rights are. In addition, a representative might insist that you should refrain from contacting the three major credit reporting agencies (Equifax, TransUnion, and Experian).
The most important thing to know is that a credit repair organization can’t do anything for you that you can do yourself. It’s just a matter of reaching out to your lender and keeping the major credit reporting agencies abreast of the situation. If you need quality help and expert guidance with your credit, your best bet is to seek assistance from a certified credit counselor. The National Foundation for Credit Counseling website features a list of NFCC member agencies in all 50 states. You can also get in touch with a certified credit counselor by calling 1-800-388-2227.