How to Avoid Credit Repair Scams

A significant industry has developed that offers to help "repair" people's credit records.

  • Some companies promise to "erase bad credit",
  • Some make sensational promises that they can provide their customers with new, clean credit histories.

Such firms usually deliver few, if any, results for the fees they charge. Bad credit cannot be "erased".

There are bona fide agencies that will help you get your credit and finances back on track without making misleading claims about removing accurate information from your credit report. How do you separate them from the scammers?

Common Credit Repair Scams

Among the most common credit repair scams are services that promise to clear your credit by doing the following:

Getting a New Social Security Number

Individuals are only permitted to have one Social Security number. It is against the law to use a different Social Security number to create a false identity.

Although under appropriate conditions the Social Security Administration will issue new Social Security numbers, such as following a documented case of identity theft, the Social Security Administration cross-references the old number with the newly issued number.

If you qualify for a new Social Security number, you must apply in person, you can obtain the forms you need for free online, and there is no charge for the application, so there is no point in paying a company for this service.

Getting a Federal Employer Identification Number (EIN or FEIN)

Proponents of the "file segregation" scam claim that you can obtain a federal tax ID number, as if you are a business, then get a clean credit record under that tax ID number.

It is against the law to use an Employer Identification Number (EIN / FEIN) to set up a false identity. Further, a new credit report under an EIN will not show any credit history at all, and it is unlikely that a creditor would regard a new business with no credit history as a good credit risk.

Challenging Every Negative Entry on a Credit History

As a general rule, it is lawful for credit agencies to maintain accurate records of negative entries on your credit history for up to seven years, and to maintain records of any bankruptcies for up to ten years. In some circumstances, accurate negative information may be reported even beyond those time periods.

Your ability to object to inaccurate information is not meant to be a license to harass honest creditors in an effort to remove accurate negative entries.

Scammers will file objections and then show you a clear credit report, without telling you that much of the information has been removed only for a thirty-day period during which the credit reporting agency is seeking conformation of the debt reports from your creditors, and will appear again if the creditor verifies the information.

Bankruptcy and Credit

If you have declared bankruptcy, a credit repair scam may target you by suggesting that once you have a bankruptcy on your credit report you can't get credit for ten years. That is a scare tactic meant to convince you to sign up for their services.

The truth is you can start building a positive credit history as soon as a Chapter 7 bankruptcy is resolved, and may be able to start building your credit during a Chapter 13 repayment plan.

Although creditors will at first be cautious, and credit options will be more expensive, you can gradually demonstrate your fiscal responsibility and build a post-bankruptcy credit history that will lead lenders to view you as a good credit risk long before the bankruptcy drops from your credit report.

Warning Signs of a Bad Credit Repair Company

When looking for help building your credit or to improve your credit score,

  • Do not use any credit repair company that charges up-front fees. Under federal law, a credit repair service may only charge for its services after its services are fully performed.1

  • Do not use any credit repair company that doesn't follow industry standards or government regulations.

  • Do not use a credit repair company that offers to "wipe out bankruptcies", to remove accurate negative information from your credit history, or to obtain credit for you without regard for your credit history.

  • Do not use a credit repair company that promises to exploit "secret" or "little known" loopholes in the system to remove information from your credit history.

  • Do not use a credit repair company that does not provide written disclosure of your rights in relation to your credit history before asking you to sign a contract.

  • Do not use a credit repair company that attempts to charge more than a modest fee before it has performed the credit repair services.

  • Do not use a credit repair company that discourages you from directly contacting the major credit bureaus.

Your contract with any company that is providing credit counseling services should include all the terms and conditions of payment, a detailed description of the services to be provided, including any guarantees of performance, and an estimate of how long it will take to perform the contract. The agreement must also inform you of your right to cancel lasting at least three days, in case you have second thoughts.2

How to Remove Inaccurate Information From Your Credit History

Although the process can be slow, it is relatively simple to object to inaccurate information on your credit history.

  1. Obtain a copy of your credit report from the three major credit reporting agencies, TransUnion, Equifax and Experian. You may obtain your credit report once per year, for free, directly from the agencies. The official website maintained by the three major credit reporting agencies for obtaining your report is

  2. After you obtain copies of your credit reports, review them for any inaccuracies. If you don't understand some of the entries on the report, check for information about codes and abbreviations on the credit report itself, the credit reporting agency's website, or ask the credit reporting agency what they mean.

  3. Once you have identified any inaccurate entries,

    • Notify the credit bureau about the entries you believe to be in error, providing as much information as you can about the error. For example, if you paid a debt which is reflected on your credit report as delinquent, you may object to the entry and provide a copy of a cancelled check reflecting payment. Once you make the report, the credit agency is responsible to investigate any errors at no expense to you, and to either verify the information in the credit report or to remove any information that is inaccurate or that cannot be verified.

    • You may also contact creditors directly to let them know of any errors, and to ask that they correct their records and forward accurate information to the credit reporting agencies.

  4. If you are unable to obtain the removal of information from your credit report, and still object to its inclusion, you may submit a written objection (up to 100 words in length) to the credit reporting agency, explaining your side of the story. The explanation will be included in your credit report, and will be distributed to anybody who obtains a copy of the report.

How to Contact The Major Credit Bureaus

To obtain copies of your credit reports from one of the three major credit reporting agencies, contact:

In addition to the free credit reports available once per year from the credit reporting agencies, a large number of commercial services will provide you with copies of your credit report. Be careful about signing up for a service that offers a free report or credit score, but takes your credit card number and signs you up for a subscription service with automatic monthly or annual fees that will be charged until you cancel your membership.

Some commercial services offer a "combined credit report", that lists the entries of all three agencies in a single document. Although you can obtain the same information from separately reviewing the three credit reports, some people like the convenience of the combined report.


1. 15 U.S. Code Sec. 1679(b) ("No credit repair organization may charge or receive any money or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform for any consumer before such service is fully performed."). 2. 15 U.S. Code Sec. 1679e. The contract must include notice of the consumer's right to cancel the contract within three business days, and be accompanied by a form that can be used to cancel the contract.

Copyright © 2003 Aaron Larson, All rights reserved. No portion of this article may be reproduced without the express written permission of the copyright holder. If you use a quotation, excerpt or paraphrase of this article, except as otherwise authorized in writing by the author of the article you must cite this article as a source for your work and include a link back to the original article from any online materials that incorporate or are derived from the content of this article.

This article was last reviewed or amended on May 7, 2018.