How to spot a credit repair scam

March 03, 2021

When you set out to repair your credit, be on the lookout for scams that could cost you in time, stress and legal fees.

 

By now, you’ve probably noticed that your credit score comes into play whenever you’re making big financial moves — whether you’re applying for a mortgage, buying a new car or qualifying for a loan. If you have a low credit score, you might be having a hard time getting approved for any large loans or purchases, which can make credit repair an alluring idea. However, many companies that claim to help with credit repair or offer a “new credit identity” are scams that could leave you in a worse position than when you started. Here’s how you can spot a scam before it’s too late.

 

What is a credit repair scam?

A credit repair scam usually starts with a company offering to “fix” your credit score, usually through advertisements online or in the mail. Often, these companies will ask for a fee up front, and once you’ve paid it, you never hear from them again. If you give them your Social Security number, they can sell it to other companies illegally. Some scams will offer a “new credit identity,” claiming they can help you start fresh with a new SSN. If you use an SSN other than your own when you apply for a loan or line of credit, you could end up facing steep fines.

 

What are the signs of a scam?

Here are some telltale signs a credit or loan company isn’t legit:

  • Lack of online presence: A quick search of the company mentioned in the ad can be very telling. Even if the company has a website, check the Better Business Bureau to ensure they’re up to industry standards. You can even check with your state's attorney general’s office if you’re still skeptical. 
  • Up front payments with no listed legal rights: The offer you’re dealing with is most likely a scam if they ask for money up front and provide no details on the actions they’ll take. By law, a credit repair company is required to explain your legal rights, give you a 3-day right to cancel for no charge, outline the total cost you’ll pay and provide a detailed list of what steps they’ll take to help. If you pay an origination fee, it should be factored into the total you pay later. 
  • Advice to falsify info: If the company you’re dealing with advises that you lie on a credit card or loan application, use a fake SSN or dispute information from your credit report, it’s a scam. All of these actions are illegal, and a legitimate company won’t advise you to falsify any information.

 

How can I actually repair my credit?

There are ways you can improve your credit over time without putting your financial standing at risk. Educate yourself on what goes into a credit score, and address each component when and where you can. Paying bills on time and making a plan to pay back credit card debt is a great place to start. Once you’re out of debt, keep your credit utilization low. If the amount of debt you’re dealing with is overwhelming, consider consolidating your debt. Repairing your credit takes time, but doing it right keeps you and your money safer. 

 

Find more resources on establishing credit to build your history and be ready for credit when you need it.

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Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, home equity and credit products are offered by U.S. Bank National Association. Deposit products are offered by U.S. Bank National Association. Member FDIC.