How to Spot and Avoid Credit Repair and Debt Relief Scams

Debt relief service scams target consumers with significant credit card debt by falsely promising to negotiate with their creditors to settle or reduce their repayment obligations. These operations often charge cash-strapped consumers a hefty up-front fee but fail to help them resolve or lower their debts – if they provide any service at all. Some debt relief scams even tout their services using automated "robocalls" to consumers on the Do-Not-Call List.

Credit repair scams also frequently target financially distressed consumers with credit problems. These operations lure consumers to purchase their services by falsely claiming that they will remove negative information from consumers' credit reports, even if that information is accurate.

Recognizing a Credit Repair Scam

Warning signs for credit repair scams include companies that ask you to pay before providing services. The company may tell you it can guarantee a specific increase in your credit score or eliminate negative credit information in your credit report, even though the information is accurate and current.

If you see ads or receive offers to repair or fix your credit, it could be a warning sign if the company:

• Pressures you to pay up-front fees. Under the federal Credit Repair Organizations Act, credit repair companies can only request or receive payment once they've completed the promised services. Some companies will structure monthly payment plans to try to avoid this requirement. You should know that all forms of upfront payment before services are completed are illegal.
• Promises to remove negative information from your credit report. The company tells you it can get rid of the negative credit information, even if that information is accurate and current. No one can do this.
• Requests you dispute accurate information in your credit report. The company advises you to dispute all the information in your credit report, regardless of its accuracy or timeliness.
• Refuses or avoids explaining your rights to you. The company doesn't tell you your rights and what you can do for yourself for free. Disputing errors in your credit reports is a free legal right under the Fair Credit Reporting Act; you don't need to pay a credit repair organization to do it for you. Also, if you have just signed up for a credit repair service, you have the right to cancel your contract with any credit repair organization for any reason within three business days at no charge to you.
• Tells you to refrain from contacting credit reporting companies. The company recommends you refrain from contacting nationwide credit reporting companies directly.

If you need help figuring out where to start, consider talking to one of our Certified Credit Union Financial Counselors. They're available by appointment, and their services are free to members. 

Azura's Financial Counselors are certified to assist you with creating a budget, understanding your credit report, regaining control of your finances to get out of debt, and more! 

Learn more at AzuraCU.com/TakeControl and schedule your free appointment today.