If you’re facing economic hardships, you may turn to a credit repair agency. Unfortunately, there are many scams involving credit and debt relief. In particular, you may encounter agencies that charge upfront fees without delivering the results they promise. Find out how to protect yourself below.

The Dangers of Credit Repair Scams

Good credit is important. A bad rating may make it impossible for you to secure a mortgage, for instance, and get in the way of your dream of homeownership. Credit repair companies offer to “fix” credit, but their claims are often fraudulent.

According to the Federal Trade Commission, credit and debt relief scams are on the rise. Some companies may take your money without helping you. Others may even take your Social Security number and sell it illegally.

How to Identify a Fraud

A fraudulent credit repair company may insist on payment before actually doing any work for you. They may also encourage you to engage in illegal acts, like giving false information on loan or credit applications.

Another red flag is if they tell you not to contact credit reporting companies yourself. Finally, they may use bombastic language, promising you a “new credit identity” quickly. In reality, a bad credit history takes time to fix. It can't be done overnight, but it can be done.

What Legitimate Credit Repair Looks Like

If you’re facing insurmountable debts that you can’t pay off, filing for bankruptcy is sometimes an option. A successful filing will result in debt relief, as some or all of your debts will be discharged, so you don’t have to pay them.

Bankruptcy does take a toll on your credit, but you can fix it with time. Start by taking out a secured credit card, using it regularly, and always paying off the minimum balance due. Later, diversify your debt by taking on a small loan you’re sure you can pay off. Over time, you will regain a strong credit rating.

Donald L. Spafford, Jr., Attorney at Law, offers bankruptcy and debt relief services to clients throughout Honolulu, HI. He brings more than 30 years of experience to the table, handling both Chapter 7 and Chapter 13 bankruptcy filings. He and his team will provide personalized legal counsel based on your financial situation. Learn more about his experience online. To schedule a free consultation, call (808) 532-6300.