Consumers are vulnerable to a variety of credit repair scams that promise a solution, especially if you have a shaky credit history. These scams often appear as an apparition of hope just when life has delivered you with financial difficulties that send your credit rating plummeting. Don’t be fooled. These companies are predators looking to suck you in, because they want to profit off your misfortune, rather than help you.
The truth is that there is no fast solution to get poor credit to miraculously become excellent overnight. Negative Information stays on your credit report for up to seven years. On the up-side, positive information stays on your credit report for up to 10 years. Once you have a black mark, it’s unfortunate how the lending industry holds you accountable for seven years, but it is a fact of life in modern society. In this article, I’m going to expose and dissect a few of the most popular types of scams.
The first type of scam I am going to address is credit repair firms. I always advise clients to avoid credit repair companies like the plague. These companies will promise to raise your credit score in a short period of time to help you secure a good rate on a mortgage or car loan. They will charge you hundreds, sometimes thousands of dollars to provide you with their services. In reality, credit repair firms steal your hard earned money and dig you deeper in debt.
The tactics used by credit repair firms’ verge on the edge of being illegal, if not outright illegal. They commonly look for legal loopholes that are quickly found out by the credit bureaus and then almost always made illegal. Credit repair companies can actually get you into legal trouble personally, too. As a consumer you can also be held accountable for fraud if you misrepresent your social security information or lie on a credit application.
A popular credit repair firm tactic that firms used was called “piggybacking.” “Piggybacking” would basically allow a consumer with poor credit to “rent out” another person’s good credit history. Consumers would pay hundreds of dollars to the consumer with good credit and the agency and would instantly reap the benefits of a good credit history. Many consumers secured mortgages or low rate car loans due to this completely legal practice. This tactic is now being made illegal.
Another popular legal tactic used in the past was to dispute every single negative item on your credit report. Credit bureaus were required to remove negative information from your file if they didn’t send a response to your dispute within thirty days. Early in my career, a representative from Trans-union informed me that credit reporting agencies are so overloaded with paperwork often times you won’t get a response.
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