Illegal Credit Repair Scams Could Land You in Jail

Have you seen these illegal credit repair ads on TV? They come in two varieties. One sports big flashy graphics and some guy shouting at you – maybe talking about how unfair life is and how you can fight back now. The other variety has a very kindly looking father-figure explaining that he knows just what you've been going through, and he's there to help.

Here's a few of their promises:

“Credit problems? No problem!”
“We can erase your bad credit — 100% guaranteed.”
“Create a new credit identity — legally.”
“We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!”

The truth is, they're lying. There's no other way to say it. No one (except Father Time) can erase bankruptcy, judgments, or overdue bills. What they actually can do is help you get errors removed.

But how likely is it that everything negative on your report is in error? It could happen if you've been a victim of identity theft, but that's about the only way.

The other thing they'll actually do is help you get rid of whatever money you do have. They charge plenty for their "services." So, your financial situation will be worse than when you asked for help.

An honest credit repair company will do two things: They'll work to get the errors removed, and then they'll work with you to get your debts repaid. They might contact your creditors and negotiate on your behalf so that you can work on repayment without running up over limit fees and excessive interest. And they'll probably help you create a budget that allows for paying the negotiated amounts.

But you won't see these people advertising on TV. Most of the honest ones are either free or low-cost.

But this story gets worse. If you follow bad advice, you could actually be subject to prosecution. One common way for these companies to "erase" your bad credit is by showing you how to invent a “new” credit identity — and then, a new credit report — by applying for an Employer Identification Number to use instead of your Social Security number.

This is called fraud, and it could get you into a lot worse trouble than having too many unpaid bills. It’s a federal crime to lie on a loan or credit application, to misrepresent your Social Security number, and to obtain an Employer Identification Number from the Internal Revenue Service under false pretenses.

About the author: John Rasor is the owner of http://www.creditscorecowboy.com/. CreditScoreCowboy.com is a great source for free credit reports, free credit scores, fico scores, identity theft software, and free information on how to repair your credit for free.