The credit repair industry is the "Wild West" of finance. For every legitimate company working within the law to help you, there are ten predators waiting to take your money and leave you in worse shape.
The difference isn't just about quality service—it's about federal law. The Credit Repair Organizations Act (CROA) draws a sharp line in the sand. Cross it, and a "service" becomes a scam. Here is how to tell the difference before you spend a dime.
🚫 The "Big Three" Scams
If a company does ANY of these three things, they are breaking federal law. Walk away immediately.
- 1. Upfront Fees:It is ILLEGAL for a credit repair company to charge you a penny before they have completed the work. If they ask for a "setup fee" or "first month's retainer" before sending a single dispute, they are violating the CROA.
- 2. Guaranteed Results:No one can guarantee the removal of accurate information. If they say "We promise to raise your score 100 points" or "We remove bankruptcies 100% of the time," they are lying.
- 3. The Information Audit (Jamming):Telling you to dispute everything on your report—even accounts you know are yours—is fraud.
The "New Identity" Trap (CPN Scams)
This is the most dangerous scam of all. A company might offer you a "fresh start" by selling you a:
- CPN (Credit Privacy Number)
- SCN (Secondary Credit Number)
- EIN (Employer Identification Number)
WARNING: Using a CPN to apply for credit is a federal crime.
These numbers are often stolen Social Security Numbers from children or the deceased. If you use one, you could be facing prison time for mortgage fraud or wire fraud. Never, ever use a number other than your SSN for personal credit.
Legit vs. Fraud: The Checklist
| ✅ Legitimate Service | ❌ Fraudulent Service |
|---|---|
| Written Contract: specific services, timeline, and total cost. | Verbal Promises: "We'll just fix it, trust us." No paper trail. |
| The 3-Day Wait: Gives you a "cooling off" period to cancel for free. | Pressure Tactics: "Sign now or this offer expires!" |
| Honest Advice: Explains that accurate negative info stays for 7 years. | Magic Eraser: Claims they can remove judgments overnight. |
| Rights First: Tells you that you can dispute on your own for free. | Secrecy: Tells you NOT to contact credit bureaus yourself. |
Did You Pay Upfront? Get Your Money Back.
If a credit repair company charged you before completing their service, they violated the CROA. This means their contract with you is void, and you may be entitled to sue them for:
Full Refund
Every penny you paid them.
Punitive Damages
Extra money to punish their fraud.
Attorney Fees
They pay for your lawyer.