Credit repair schemes can make your situation worse

REAL ESTATE MATTERS

January 11, 2008|By ILYCE GLINK

Every day, thousands of people type the words "credit repair" into an Internet search engine. Thousands more type in phrases like "bad credit" or "bad credit repair."

Figuring out how to repair your credit is on the minds of homebuyers, sellers and owners, each of whom has realized that having stellar credit gives you financial options that simply aren't available to those with low credit scores.

Unfortunately, some of the Web sites that come up in a search for "credit repair" can do more harm than good. Scams abound in times like these, with a shaky economy, record levels of foreclosures and rising numbers of bankruptcies, credit card delinquencies and late mortgage payments.

Yet some people are so desperate that they'll try anything, even a general search on the Internet.

The typical credit repair scam works in one of a couple of different ways. There is always the promise that your credit history will be wiped clean, and you'll be asked for a large payment upfront, sometimes as much as $1,000 to $1,500.

In one typical scam, the credit repair organization will tell you that you'll get a brand new Social Security number. Since the Social Security number is new, it won't have any blemishes on it and your credit will be perfect.

Unfortunately, the Social Security Administration almost never gives out a new Social Security number - even to people who have had their number stolen and used over and over again.

Instead, the administration expects that you will work hard to clean up the fraud, or at least do what you can to live with it. Only in extremely rare cases, such as when a Social Security number has been stolen and used by dozens of people, will the office consider issuing someone a new number.

So what is the credit repair company actually doing? It is filing for a new number, but it's an EIN, an employer identification number. This is a nine-digit number (similar to a Social Security number) that is used to identify companies to the Internal Revenue Service or for tax payment purposes only.

If you start using an EIN as your Social Security number, and change the way your income is reported to the IRS, you'll find yourself in a pickle when it comes time to retire and the IRS has no record of your work history. You might also find yourself accused of conspiring to commit fraud.

Another common credit repair scam is to dispute all of the negative information on your credit history.

Under federal law, a credit reporting bureau must investigate all disputes within 30 days. If the bureau can confirm the negative information, it stays on your report. But if it can't confirm it, the information is pulled off your credit history.

But here's the key: While the information is being disputed, it temporarily disappears from your credit history. So, your credit history looks perfect, even though it isn't. At the end of the 30 days, the credit repair company will dispute all of the charges again.

For a big fat fee, credit repair companies promise you the moon. Unfortunately, all you're going to get is trouble - and a much thinner wallet.

Next week: What can you do to legitimately repair your credit? I'll have 10 tips for improving your credit history and raising your credit score.

Contact Ilyce Glink through her Web site, www.thinkglink.com, by mail at Real Estate Matters Syndicate, P.O. Box 366, Glencoe, Ill. 60022 or calling her radio show at 800-972-8255 from 11 a.m. to noon Sundays.

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