Gerri Willis Commentary:
Top Tips by Gerri Willis Column archive

Avoiding credit repair scams

Cleaning up your history could get you into bigger trouble if you get taken in. Here's how to see through a con game.

Subscribe to Personal Finance
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Gerri Willis, CNN

NEW YORK (CNNMoney.com) -- Banks are tightening their purse strings, making it harder to qualify for loans. And now the Better Business Bureau is warning that some companies are using the credit crunch to take advantage of consumers who want to clean up their credit. Here are some top tips on avoiding these scams.

1: Get the lowdown

Complaints against credit repair companies have risen for three straight years, increasing more than 38% since 2004 according to the Better Business Bureau.

You've probably heard of these services before. Ads are common on the radio, in television, in newspapers and in direct mail advertising. The Internet is another area ripe with credit repair scam artists.

In some cases, consumers pay these companies large fees up front - we're talking about more than $1500 in some cases. In return these companies promise to erase any blemishes on credit records, get new Social Security numbers for clients, or allow consumers to piggyback on someone else's credit record.

First of all, no one can remove accurate and timely negative information from your credit report. Secondly, it's almost impossible to get a new social security number. Finally, piggybacking is a thing of the past. This is a practice where you basically borrow someone else's credit score to boost your own credit standing.

The bottom line here is that anything a credit repair company can do legally, is something that you can do yourself - for free.

2: Know your rights

If you respond to a credit repair offer, by law you should be provided a copy of your consumer rights. This is a one-page document that tells you what your rights are if you dispute inaccurate information with credit repair companies.

You have the right to cancel a contract with any credit repair organization for any reason within three business days from the date the contract was signed, according to the Better Business Bureau.

3: Watch for Red Flags

If the credit repair company doesn't tell you what your legal rights are or doesn't tell you what actions you can take yourself, that's a big red flag. Don't trust a credit repair company that advises you not to contact a credit bureau directly.

Make sure you don't pay for any services upfront.

Don't do business with any company that encourages you to create an employer ID number instead of a social security number. And don't believe offers that will let you piggyback on someone else's good credit.

Before you do business with any credit repair company, check them out at the Better Business Bureau at www.welcome.bbb.org.

4: Get legitimate help

If you have a serious credit problem, check out the Consumer Credit Counseling Services. You will be able to get counseling for a low fee, or even free in some cases.

Some of the services provided may include working out a payment plan with lenders, as well as guidance and advice to help you stay out of debt.

To find an office in your area, call 1-800-388-2227, or go to www.nfcc.org. To top of page

Gerri's Mailbox: Got questions about your money? We want to hear them! Send e-mails to toptips@cnn.com or click here - each week, we'll answer questions on CNN, Headline News and CNNMoney.com.
Photo Galleries
Most 'one percent' moments of 2014 This year was all about more money, more problems. Here's a look at the trials, tribulations and triumphs of the 1% over the last year. More
6 products to keep the skies friendly Plane travel can be stressful, especially during the holidays. These things can help keep the peace among travelers. More
2014: Helluva good year for stocks The bull market has been going for 2,115 days. If you put you're money in stocks, it's been a very happy year. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.