I am posting this in regard to a recent thread on repairing credit. I saved an article published in the paper in January 2008 (I bolded a section which I find amazing that people think what they pay for is going to work in the long run) and here it is, taken off the writer's website:
Credit Repair: Beware of Scams
By Ilcye Glink
January 26, 2008
"Every day, thousands of people type the words "credit repair" into an Internet search engine. Thousands more type in phrases like "bad credit" or "bad credit repair."
Figuring out how to repair your credit is on the minds of home buyers, sellers and owners, all of whom have realized that having stellar credit gives you financial options -- options that simply aren't available to those with low credit scores.
Unfortunately, some of the Web sites that come up in a search for "credit repair" can do more harm than good.
Credit repair scams abound in economic times like these: a shaky economy; record levels of foreclosures; and a rising number of bankruptcies, credit card delinquencies and late mortgage payments.
And yet, some people are so desperate, that they'll try anything, even a general search on the Internet.
The typical credit repair scam works in one of a couple of different ways. There is always the promise that your credit history will be wiped clean, and you'll be asked for a large payment upfront, sometimes as much as $1,000 to $1,500.
In one typical scam, the credit repair organization will tell you that you'll get a brand-new Social Security number. Since the Social Security number is new, it won't have any blemishes on it and your credit will be perfect.
Unfortunately, the Social Security Administration (SSA) almost never gives out a new Social Security number -- even to people who have legitimately had their number stolen and used over and over again.
Instead, the SSA expects that you will work hard to clean up the fraud, or at least do what you can to live with it. Only in extremely rare cases, such as when a Social Security number has been stolen and used by dozens of people will the office consider issuing someone a new number.
So what is the credit repair company actually doing? They are filing for a new number, but it's an EIN, an employer identification number. This is a nine-digit number (the same as a Social Security number) that is used to identify companies to the IRS or for tax payment purposes only.
If you start using an EIN as your Social Security number and change how your income is reported to the IRS, you'll find yourself in a pickle when it comes to retire and the IRS has no record of your work history. You might also find yourself accused of conspiring to commit fraud.
Another common credit repair scam is to dispute all of the negative information on your credit history.
Under federal law, a credit reporting bureau must investigate all disputes within 30 days. If the bureau can confirm the negative information, it stays on your report. But if it can't confirm it, the information is pulled off of your credit history.
But here's the key: While the information is being disputed, it temporarily disappears from your credit history. So, your credit history looks perfect, even though it isn't. At the end of the 30 days, the credit repair company will dispute all of the charges again.
For a big fat fee, credit repair companies promise you the moon. Unfortunately, all you're going to get is trouble -- and a much thinner wallet."
Credit Repair: Beware of Scams
By Ilcye Glink
January 26, 2008
"Every day, thousands of people type the words "credit repair" into an Internet search engine. Thousands more type in phrases like "bad credit" or "bad credit repair."
Figuring out how to repair your credit is on the minds of home buyers, sellers and owners, all of whom have realized that having stellar credit gives you financial options -- options that simply aren't available to those with low credit scores.
Unfortunately, some of the Web sites that come up in a search for "credit repair" can do more harm than good.
Credit repair scams abound in economic times like these: a shaky economy; record levels of foreclosures; and a rising number of bankruptcies, credit card delinquencies and late mortgage payments.
And yet, some people are so desperate, that they'll try anything, even a general search on the Internet.
The typical credit repair scam works in one of a couple of different ways. There is always the promise that your credit history will be wiped clean, and you'll be asked for a large payment upfront, sometimes as much as $1,000 to $1,500.
In one typical scam, the credit repair organization will tell you that you'll get a brand-new Social Security number. Since the Social Security number is new, it won't have any blemishes on it and your credit will be perfect.
Unfortunately, the Social Security Administration (SSA) almost never gives out a new Social Security number -- even to people who have legitimately had their number stolen and used over and over again.
Instead, the SSA expects that you will work hard to clean up the fraud, or at least do what you can to live with it. Only in extremely rare cases, such as when a Social Security number has been stolen and used by dozens of people will the office consider issuing someone a new number.
So what is the credit repair company actually doing? They are filing for a new number, but it's an EIN, an employer identification number. This is a nine-digit number (the same as a Social Security number) that is used to identify companies to the IRS or for tax payment purposes only.
If you start using an EIN as your Social Security number and change how your income is reported to the IRS, you'll find yourself in a pickle when it comes to retire and the IRS has no record of your work history. You might also find yourself accused of conspiring to commit fraud.
Another common credit repair scam is to dispute all of the negative information on your credit history.
Under federal law, a credit reporting bureau must investigate all disputes within 30 days. If the bureau can confirm the negative information, it stays on your report. But if it can't confirm it, the information is pulled off of your credit history.
But here's the key: While the information is being disputed, it temporarily disappears from your credit history. So, your credit history looks perfect, even though it isn't. At the end of the 30 days, the credit repair company will dispute all of the charges again.
For a big fat fee, credit repair companies promise you the moon. Unfortunately, all you're going to get is trouble -- and a much thinner wallet."