What's Dangerous about Credit Repair?
By InCharge Institute of America, Inc.
InCharge Institute of America, Inc.
Have you ever seen or heard advertisements on TV, radio,
or the Internet that promise to hide your negative credit
information and to establish a new credit identity?
It's a business loosely known as credit repair, and
it's not always what it's cracked up to be.
Credit repair companies often make illegal or false claims
to lure consumers. They target people with poor credit
histories, particularly those with recent bankruptcies who
may have difficulty getting new credit or loans. These
organizations falsely claim they can legitimately erase
bad credit; remove bankruptcies, judgments, and liens; and
create a new credit identity. Moreover, they charge fees
for legal steps you can easily do yourself.
No credit repair company can improve your credit report or
erase negative, accurate information. The only way to
rebuild your credit record is to make a conscious effort
to pay off debts. Keep in mind also that there is nothing
a credit repair agency can do for you legally that you
can't do for yourself. By law, you can dispute - at no
charge - any credit report information that is incorrect
Fraudulent credit repair companies offer a fee-based
service that instructs consumers to apply to the IRS for
an Employee Identification Number (EIN). EIN numbers are
used by legitimate businesses to report financial
information to the IRS and the Social Security
Administration. The credit repair service then directs you
to establish a new mailing address, phone number, and a
few credit references. Finally, the company instructs you
to use your newly acquired EIN number in place of your
Social Security number when applying for new credit. Fees
for this service range from a few hundred to a few
The Problem With Credit Repair
Credit repair companies usually fail to divulge that it
is a federal crime to:
Obtain an EIN from the IRS under false pretenses
Misrepresent your Social Security number
Make false statements on a loan or credit applications
Additionally, using the mail or telephone to apply for
credit and providing false information can constitute mail
or wire fraud.
The Credit Repair Organizations Act prohibits
organizations from providing false claims regarding credit
repair and restricts such companies from charging any fees
until services are carried out. The law also requires that
credit repair companies inform consumers of their legal
rights in a written contract. This contract should include
notification of all services performed, the time it will
take to execute these services, total cost, any
guarantees, and an explanation that consumers have three
days to cancel the service at no charge.
If you are having trouble paying off your debts, try
contacting a reputable, non-profit credit counseling
organization that can help you arrange a repayment plan. A
repayment plan enables you to rebuild your credit by
making consistent monthly payments, which will reflect
positively on your credit report.