National Association Of Attorneys General Urges Consumers to Beware of ‘Credit Repair’ Scams

January 2008

Now that the holidays are over, millions of Americans will find themselves burdened with additional debt. Starting this month, you might spot a brightly-colored flier tucked under your windshield wiper or see an ad in a newspaper, on television or on the Internet offering to clean up your credit with counseling and credit repair services.

The National Association of Attorneys General (NAAG) warns you to avoid credit repair companies that target consumers with poor credit histories and charge thousands of dollars in fees, but do nothing to improve your credit report or pay off your debts. Unfortunately, most of them just disappear with your money.

Only time, a conscious effort, and a personal debt repayment plan will improve your credit report and allow you to decrease or pay off your debt.

However, if you choose to respond to a credit repair offer, it is important to be aware of laws that can protect you if you become a victim. By law, credit repair organizations must give you a copy of the “Consumer Credit File Rights Under State and Federal Law” before you sign a contract. They also must give you a written contract that spells out your rights and obligations.

If you are considering taking steps to improve your credit report, please consider the following tips from NAAG and the Federal Trade Commission (FTC):

  • Accurate Negative Credit Information Cannot Be Erased. If a credit repair company tells you that it will be able to remove negative information from your credit report, the company is not telling you the truth. Accurate information which is within seven years of the reporting period, or ten years if the information relates to a bankruptcy, cannot be erased from a credit report. The only items that can be changed are items that are actually wrong, or are beyond the seven or ten year reporting date. If you have a poor credit history, time is the only thing that will repair your credit report.
  • Hiding Bad Credit May Be Illegal. Some credit repair schemes promise you that they can "hide" bad credit by helping you establish a new credit identity. If you pay a fee for such a service, the company may direct you to apply for an Employer Identification Number (EIN) from the Internal Revenue Service, and to use the EIN in place of your social security number when you apply for credit. You may also be instructed to use a new mailing address. This practice, known as file segregation, is a federal crime.
  • How To Clean Up Your Credit Report Yourself. The truth is, you can help yourself re-build a better credit record. Start by contacting your creditors when you realize that you cannot make scheduled payments. If you need help working out a payment plan and a budget, contact your local credit counseling service. These non-profit groups offer credit guidance to consumers, and their services are available at little or no cost to you. Also, check with your employer, credit union, or housing authority for other no-cost credit counseling programs. Anything a credit repair company can do, you can do on your own.
  • Research The Companies. Contact the local consumer agencies in the county where the company is located, or the Attorney General's Office in that state to determine if there are complaints or legal actions pending against the company.

If you’ve had a problem with a credit repair company, contact your state Attorney General. Many Attorneys General have toll-free consumer hotlines that will respond to your complaint. You can also contact the FTC at

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