Beware firms promising to scrub bad credit reports

The FTC suit says customers typically sign a contract for services and must "pay an advance fee of approximately $400" before proceeding. Asked for comment on the suit, Daniel Miranda, a co-owner of Clean Credit, said the FTC's action "is completely unmerited." The firm does not promise to remove accurate, negative information from credit files, he said, and does not collect fees for credit repair in advance.

Instead, he said, "every customer is offered a product" - a compact disc plus a book that provide instructions on how consumers can improve their credit files on their own. The cost of the CD and book, according to the company's Web site, is $399.95 plus $9.95 shipping and handling. Money collected from customers upfront "is for the product [CD and book]," said Miranda, and the firm performs a "voice-recorded verification" that consumers understand "they are paying for the product."

Consumers who wish to proceed with credit file repair join a "club" at no cost for the first two months, and $12.95 a month after that. Asked whether $400 is a reasonable charge for a book and a CD, Miranda said "the value of that product is far beyond" what the company charges.

The FTC's suit alleges that once clients have paid the $400, Clean Credit does "little, if anything, to fulfill the promises made to consumers." When unhappy customers complain, the FTC says, they are "sometimes hung up on, put on hold, or ignored."

In an interview, Miranda denied those allegations and said the company has assisted more than 75,000 clients, of whom about 150 have filed complaints with the Better Business Bureau.

Resolution of the Clean Credit case and others will be up to federal courts in the coming months. But the takeaway for homebuyers and others seeking to rapidly boost their credit scores is this: Whatever sales people may tell you, it is impossible legally to remove a valid record of a severe default, bankruptcy or foreclosure from your files. On the other hand, it may be possible to remove inaccurate or outdated records.

Finally, if anyone requires money upfront, walk away. It's against federal law.