Trying to repair your credit can feel like an impossible cycle. It’s challenging to get approved for loans or credit cards when you have poor credit; yet these are the very tools that are supposed to help you improve your credit in the first place.
If you’re struggling to repair your credit, companies promising to erase your problems overnight might catch your eye. Unfortunately, if you see an offer that looks too good to be true – it probably is.
Credit repair scams prey on people desperate to fix their credit. They can drain your finances and risk damaging your credit score even further. In the worst case scenario, they can even lead to jail time.
As you work to repair your credit score, understand the warning signs of a fraudulent credit scheme – and stay away from these four “quick fixes.”
If you come across an online ad or social post promising “a new credit identity” to fix your financial woes – steer clear. Chances are, you’ve encountered a credit profile number (CPNs) scheme.
Also known as credit privacy numbers, a CPN is a nine-digit number formatted like a social security number (xxx-xx-xxx). Credit repair scams market CPNs as a way to wipe your credit history clean and rapidly improve your credit score.
Sellers instruct buyers to use their CPN in place of their social security number when applying for new credit. This way, lenders might not catch negative activity linked to a borrower’s social security number – like a bankruptcy or default loan.
For consumers struggling with poor credit, CPNs can seem like a crucial second-chance. But using one can land you in serious hot water.
Some CPNs are number combinations that haven’t been issued as social security numbers. Others are linked to individuals without a credit history, like children, elderly people, or prison inmates. No matter where they come from, CPNs can lead to serious legal trouble.
Even if a CPN seller says otherwise, misrepresenting your social security number on a credit application is considered false representation – and it’s a federal crime. Using a CPN that is linked to another individual can also be considered identity theft.
CPNs aren’t the only credit “quick fixes” that target vulnerable consumers. Beware of companies that promise to wipe negative marks from your credit report altogether. These offers are usually illegal credit repair schemes called credit washing.
Credit washing schemes lure consumers in by promising to rapidly reverse negative credit history. Their solution? Claim the account isn’t yours.
Under the Fair Credit Reporting Act (FCRA), if a consumer files an identity theft claim with a lender or credit bureau, the institution must block reporting of the disputed accounts within four days. The institution then has a narrow window of time to review the claim’s validity. Otherwise, it’s settled in favor of the consumer.
These protections help consumers minimize the damage of legitimate identity theft. Unfortunately, fraudulent credit building scams use credit washing to exploit these protections.
Credit washing is the process of removing accurate negative information from a credit report by falsely claiming identity theft. If the institution cannot disprove the claim within the required time frame, the activity is removed from the credit report.
Credit washing might seem like a quick way to boost your credit score or erase outstanding debt. But disputing accurate information on your credit report is against the law.
Whether you file a fraudulent claim on your own, or a credit repair company submits one on your behalf – credit washing is illegal.
Fixing your credit may feel like a daunting task. When credit repair companies offer to help you through the process in exchange for a fee, you may find these services appealing.
Unfortunately, many credit repair companies prey on desperate consumers. Credit repair scams can cost you serious cash and still leave your credit score unchanged. At their worst, you could wind up breaking the law – or the victim of identity theft.
Not all credit repair companies are scams, but it’s important to know the red flags. A fraudulent credit repair company may:
You might think a loan can help you get caught up on bills or cover unexpected expenses between paychecks. But predatory lenders target people in vulnerable financial situations – and their “quick fixes” can lead to a painful cycle of debt.
Predatory lenders use unethical tactics to drain borrowers of their financial assets. A few tell-tale signs of a predatory loan are: sky-high interest rates; confusing or unclear payback terms; and a rushed or aggressive application process
Predatory lenders usually don’t report positive repayment to the credit bureaus. That means, even if you pay your debt back as agreed, it won’t help your credit score. By design, this keeps vulnerable borrowers bound to exploitative lenders.
Learn more: How to protect yourself from predatory loans
You don’t have to choose between poor credit and predatory credit repair schemes. StellarFi improves factors that make up 80% of your credit score, like credit age and on-time payments. Unlike secured credit cards, there’s no security deposit.
With Stellar, you can build positive credit history with the bills you pay each month already – like rent payments, your phone bill, and even your Netflix subscription. Signing up only takes a few minutes, and there’s no credit check or added fees.
Ready to improve your credit? Check out StellarFi and get started today.
The StellarFi blog is intended to serve as an informational resource. While StellarFi can help you build your credit, we do not provide financial, legal, or accounting advice. Please consult a trusted advisor for financial, legal, or accounting guidance as needed.