Illegal Credit Repair - Why You Should Avoid It
In America, there is a history of wanting everything and wanting it now. This type of attitude has caused the downfall of many companies and the financial ruin of millions of individuals. Credit card companies are not the enemy, however, using a credit card for every purchase because money is short eventually creates a negative credit report that is difficult to fix, and takes time to repair. Unfortunately, many individuals fall into the trap of using a credit repair company that uses illegal credit repair tactics to raise the credit of their client so they can get a mortgage, buy a car, or worse create more credit debt.
Illegal credit repair was once a serious problem in the United States. Most consumers who utilized companies who practiced illegal credit repair companies were usually unaware that illegal practices were being used. However, the government did not consider this fact and all parties involved were arrested and prosecuted, using credit repair services became a buyer beware domain.
While illegal credit repair practices still occur, it is much more difficult for a credit repair firm to get away with it. Formally, they would recommend that their client apply for an EIN number from the government for their business (which usually did not exist, the first sign that the consumer should have stopped participating). EIN resemble a Social Security numbers and credit repair companies would recommend that their clients use this number in lieu of their normal Social Security number, and of course, new credit was established. The real issue with using this tact, besides it being illegal, is that the client's original credit was still bad, and it was not going to be fixed. Computers and the internet have made the EIN fraud virtually non-existent, if a company does attempt to use this tactic, it will eventually be discovered and the client who paid for the service is the one who will pay the price.
Another form of illegal credit repair is a relatively new approach to helping individuals fix their credit. Companies will assist a client in finding a co-signer with good credit to co-sign loans and credit cards. When a co-signer has good credit, this credit is reflected on the credit report of the individual with poor credit and their credit score increases. If this sounds too good to be true, that is because it is. A co-signer is agreeing to take responsibility for a debt if the loan or credit payments are defaulted; the co-signers here are paid a fee for their good credit and do not intend to pay on a loan that has been defaulted. This constitutes fraud, and naturally is an illegal credit repair service. Unfortunately, those who practice illegal credit repair are preying on the desperate; those individuals who need to buy a car or purchase a home but find they cannot until their credit score is better. What these individuals need to understand is that the credit reporting system is set up in such a way that the person in credit card debt can contact their own creditors, dispute what they consider erroneous reporting, and make payment arrangements with those that they owe money too. This is the only legal way of improving a credit score and illegal credit repair is not worth spending time in jail.
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