Credit Repair Rip-offs

Holly DeVilbiss of Anaheim, Calif., just wanted to check her credit report. “I had gotten an e-mail from MyPerfectCredit.com, saying if you go online and sign up, for $1 you get a credit report—with no other fees,” she says.

She paid the $1 with a debit card. Months later, the company debited an additional $40 from her checking account. Then came a third debit for $50.

DeVilbiss called her bank to stop payments to MyPerfectCredit. Then she called the company and learned she had unwittingly paid for its efforts to dispute negative information on her credit report, including late payments on credit cards. Having already acknowledged the late payments, she protested, “there was nothing to dispute.”

What she did dispute was the company’s right to keep charging her for services that she didn’t want. Although her request for a credit report triggered automatic enrollment in a service plan, she canceled the plan within the 14-day “trial” period. Even so, bill collectors began hounding her, sometimes calling six times a day and demanding more than $200 the company said she owed for its efforts to clean up her credit history.

DeVilbiss filed complaints with the Better Business Bureau and the California Attorney General’s Office, and the company eventually refunded her $90. In 2006, the attorney general sued MyPerfectCredit, alleging false advertising and unfair business practices, and the company agreed to pay a $150,000 civil penalty to settle the case.

Like DeVilbiss, thousands of debt-strapped consumers desperate to clean up their credit mistakes have logged complaints with federal and state officials about so-called credit repair firms. These companies falsely promise to permanently remove negative information from consumers’ credit records, often touting such claims as “We can erase your bad credit, 100 percent guaranteed” and “Create a new credit identity—legally.” But they don’t deliver.

“The fact is, they can’t,” says Eileen Harrington, deputy director of the Federal Trade Commission’s Bureau of Consumer Protection. “No one can legally remove accurate and timely information from a credit report.” Only time, conscious effort and a personal debt repayment plan can improve a consumer’s credit score.

Harrington says it’s illegal for credit repair companies to require advance payment. And beware of any request to substitute a false Social Security number or employee identification number to start a new credit identity—that could result in prosecution.

“There is absolutely no reason to pay for credit repair—ever,” Harrington says. Your best defense to repair a bad credit history:

• Visit www.annualcreditreport.com for free credit reports. You’re entitled to one report from each of the three major credit bureaus every year. You must pay for your credit score.
• You can dispute any errors or outdated information on your credit report, at no charge, by contacting the three reporting bureaus. Check with Experian, Equifax and TransUnion to learn how.
• Make regular payments on your outstanding debts.

If you believe you have been victimized by a credit repair firm, file a complaint with the FTC, your state attorney general’s office and your local Better Business Bureau.

Caroline Mayer, based in Washington, D.C., writes about consumer issues.