Be Careful Who Fixes Your Credit

If you've got bad credit, it likely stems from one or more of the following issues: missing payments on your loans, personal bankruptcy or just having too high of a debt load. Bad credit can also result from mistakes on your credit report that are not your fault.

Whether it's your fault or not, bad credit can cost you. And that may hurt even more in these days of tight credit.

If you're working on cleaning up your credit, you may get pitched by services offering to do it for you. But they can't do anything more than you can do yourself.

What's more, some credit repair organizations (CROs) are on the shady side. In fact, consumer complaints related to CROs have been on the rise over the past few years -- they were up 34% between 2004 and 2006, according to the Better Business Bureau.

If you're tempted to outsource your credit repair project, it's crucial to separate the scammers from the legitimate services. Here's how to tell the difference.

The Good Guys

Legitimate CROs will contact the credit bureaus on your behalf and submit requests to investigate the inaccuracies on your credit report. They will do the legwork for you, but nothing more or less than what you can legally do on your own.

Honest CROs will provide you with an upfront list of your rights as a consumer -- namely a copy of the Consumer Credit File Rights Under State and Federal Law -- and an explanation of what you can do on your own, without their help.

A legitimate CRO should provide the following items in any contract you might sign:

• Payment terms and services, including their total cost

• A detailed description of all of the services that will be performed

• A timeline for the performance of these services

• Any guarantee the company or organization offers

• The company's name and business address (preferably something more than a post office box)

By law, you have the right to cancel any contract you sign with a CRO within three business days of signing.

The Scams

Some scams charge consumers for services you can do on your own for free. Others, however, encourage consumers to engage in illegal activity, such as creating a new identity under false pretenses and committing mail, phone or wire fraud.

Run, don't walk, from any CRO that charges you an upfront fee before it renders any services. That's illegal, according to the Credit Repair Organizations Act.

Likewise, be wary of any service that suggests you contest all negative entries on your report, recommends that you not contact a credit bureau directly, offers to create a new identity or offers to have you use someone else's credit. All of these represent fraud in one form or another, and actually hinder your attempts to fix your credit.

If it seems illegal, don't do it -- you may be the one facing prosecution.