Consumers with bad credit may face higher interest rates on loans or other negative impacts as a result of their low credit scores, leading them to seek ways to improve their credit.
Though there is really no quick fix for a bad credit score, some con artists nevertheless take advantage of consumers by promising to restore their credit. The scammers who prey on a consumer’s need for a good credit history may guarantee results, if only the consumer forks over hundreds of dollars in advance.
Attorney General Dustin McDaniel issued this consumer alert to warn Arkansans to avoid “credit repair” scams.
“So-called credit-repair companies are unable to do anything legally that consumers can’t also do for themselves with little or no cost,” McDaniel said. “Typically, these types of businesses are great at taking a consumer’s money, but not at solving credit problems.”
Credit-repair companies commonly advertise that they can “erase bad credit” and offer a “fast and easy way” to get rid of a bad credit history. The ads are appealing to many consumers with poor credit histories, since credit reports can affect interest rates on loans, insurance premiums and suitability for a particular job.
The ads are misleading, though, McDaniel said, because there are no easy or quick ways to repair any accurate, negative credit history. Further, the Federal Credit Repair Organizations Act prevents a for-profit organization from accepting up-front fees for “credit repair.”
Federal law prohibits credit-repair organizations from making false claims or promises about their services. In addition to the prohibition against charging advance fees, credit-repair companies must provide consumers with a written contract. Consumers have three days to cancel the contract without paying any fees
McDaniel offered this advice to consumers:
• Remember that only time and diligent attention to prompt payment of credit balances can repair bad credit. Even if the credit problems are a result of illness or unemployment or other factors beyond a consumer’s control, time and timely payments are the key to a better credit report.
• Avoid companies that ask for payment in advance in order to restore credit.
• Before paying an organization anything for credit-repair services, contact the Attorney General’s Office or the Better Business Bureau to see whether any complaints have been filed against the company.
• If a credit report contains negative information that is inaccurate or obsolete, then consumers may have that information removed at their request, without any charge. The Attorney General’s Office can assist consumers in helping them remove inaccurate information from a credit report.
McDaniel encouraged consumers to obtain copies of the credit reports from the three major credit bureaus each year in order to check for inaccuracies. Visit www.annualcreditreport.com to obtain a free copy of a credit report.
For more information about credit-repair scams or other consumer issues, contact the Attorney General’s Consumer Protection Division at 800-482-8982 or visit www.GotYourBackArkansas.org