AVOIDING CREDIT REPAIRS SCAMS

We are all familiar with the adage, “If it looks too good to be true, it probably is.” But there is another important rule, the Rule of “Holes.” “When you’ve dug yourself into a hole, stop digging.”

When you find yourself in financial difficulty with your bills, you can help yourself not make matters worse by educating yourself about scams that promise to “repair” your credit. Hopefully we can prevent the victimization of our clients by these unscrupulous companies, which prey upon unwary consumers.

Unfortunately, there are plenty of scams out there in this troubled economy. People who are struggling with debt may be tempted by ads promising that (for a fee):

“We can erase your bad credit – 100 percent guaranteed!”

“Credit problems? No problem!”

“We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!”

I can assist you by counseling you to ignore these empty promises. The Wisconsin Department of Agriculture, Trade, and Consumer Protection says, “Save some money and do not believe these statements.” The Federal Trade Commission (FTC) notes that these claims are “very likely signs of a scam.”

The reality is that these companies cannot deliver on these promises. For example, accurate and timely information cannot be removed from your credit report even if there is a good reason for being behind on bills. Consumers can get inaccurate information removed from a credit report on their own and for free.

Consumers can be confident that they are dealing with a scam if the company:

• Expects you to pay in advance. Under the Credit Repair Organizations Act, companies cannot require a consumer to pay until they have completed the promised services and they cannot start performing those services until they have a signed written contract and a three-day waiting waiting period, a consumer can cancel the contract without paying anything.

• Fails to inform you what your rights are, and what you can do for yourself. The law requires credit repair organizations to give consumers a copy of the “Consumer Credit File Rights Under State and Federal Law” before a consumer signs a contract. Consumers should read the Rights disclosure and read the contract.

• Advises a consumer not to contact the major credit reporting companies directly.

• Claims it can get rid of negative credit information in a report even if that information is correct and current.

• Recommends that consumers dispute information in a credit report that is correct and current.

• Suggests that consumers establish a new credit identity, for instance by applying for an Employer Identification Number to use instead of a Social Security number. Remember, it’s a federal crime to lie on a loan or credit application, to lie about a Social Security number, or to obtain an EIN under false pretenses. Using the mail, Internet, or telephone to apply for credit using false information could cause a consumer to be prosecuted for mail or wire fraud.

It costs nothing to find out what is in a credit report. There are three national consumer reporting companies: Equifax, Experian, and TransUnion. Each is required to provide a consumer with a free copy of his or her credit report every 12 months. There is a charge for additional reports requested within a 12- month period.

To order a report, visit the centralized Web site at www.annual creditreport.com, or call 1-877- 322-8228. There is also a copy of the Annual Credit Report Request Form at www.ftc.gov/credit that can be downloaded and once completed mailed to:

Annual Credit Report Request Service

PO Box 105281

Atlanta, GA 30348-5281

Note that if a consumer contacts the companies at their individual addresses, he or she may be charged as much as $10.50 per report instead of getting a report for free. Reports can be requested from all three credit-reporting agencies at the same time, or a consumer can stagger the requests (one per company) through the year.

If a consumer finds inaccurate information, he or she can dispute it. Under the Fair Credit Reporting Act, the consumer reporting company and information provider are responsible for correcting inaccurate or incomplete information. The Federal Trade Commission Web site offers details about this process, including a sample dispute letter, at www.ftc.gov/bcp/edu/pubs/consu mer/credit/cre13.shtm.

If, after investigation, the company corrects the disputed information, a consumer can also request that the company send notices of correction to anyone who received the report in the past six months. If the investigation doesn’t resolve the dispute, a consumer can request that a statement of the dispute be included in the consumer’s file and in all future reports.

Even if negative information is true, it can still be removed by the passage of time. Consumers can request the removal of outdated information. Consumer reporting companies can report most negative information for seven years and bankruptcy information for 10 years. An unpaid judgment can be reported for seven years from the date of the entry of the judgment or until the statute of limitations runs out, whichever is longer. There is no time limit on reports of criminal convictions or for information generated as a result of an application for a job paying more than a $75,000 annual salary or for an application for more than $150,000 of credit or life insurance.

Remember that a less-thanperfect credit history does not mean that credit is out of reach as creditors set their own creditgiving standards and not all of them look at credit history the same way. Some may look only at recent years or may grant credit despite a poor history if billpaying history has improved. The FTC recommends contacting creditors informally to discuss their credit standards.

Improving creditworthiness takes time and effort, but there is help available. The FTC Web site at www.ftc.gov has fact sheets on debt consolidation, finding a trustworthy credit counselor, bankruptcy, budgeting, and other ways to climb out of the debt hole rather than digging it deeper.