A Sign of a Credit Repair Scam that Could Give You a False Positive

Posted 5/10/2010 4:23:58 PM in Credit Repair
The FTC provides 6 tips for recognizing a credit repair scam with one of those tips being that a credit repair company who "recommends that you do not contact any of the three major national credit reporting companies directly" is "up to no good".

Since the FTC website is one of, if not the most cited resources on credit repair out there, this guideline as well as the other 5 have been widely circulated on a number of other sites warning people of credit repair scams. As a consequence, it is not only the FTC site but all the other sites referencing it that are disseminating information that, because of the way it is written, can cause people to believe a perfectly legitimate credit repair company is a scam.

The issue with the quoted guideline is that it is not specific enough to be useful. What the FTC appears to be saying is "watch out for a credit repair company that tells you not to contact the credit bureaus in an attempt to repair your credit yourself" which is a valid point. You have the right to dispute negative information in your credit reports without the help of a credit repair company. Any company that tells you otherwise is misleading you.

Where the guideline becomes problematic, however, is after you have signed up with a credit repair company. Once you are paying for a credit repair service, not only is it a waste of your time to contact the credit bureaus (since the credit repair company is doing this for you), but it could prove to be detrimental to your credit score. If the credit bureaus are receiving disputes from two sources, it can tip them off that you are working with a credit repair company and while that is not against the rules, they still don't like it and can implement stall tactics to delay the process.

So if you are using the FTC's guidelines to help pick out a credit repair company, our suggestion is to make sure you understand the true intent of the "not contact any of the three major national credit reporting companies" guideline and not the statement at face value.