September 6, 2022

Having good credit can simplify your financial life. Paying bills on time and keeping credit balances low often results in fewer hassles and significant cost savings. Consumers with good credit typically have access to low-interest rate credit cards, deposit-free mobile service contracts, and smaller security deposits for housing rentals.

On the flip side, the financial lives of consumers with poor credit can get thorny. Poor credit not only makes it more challenging to obtain the same approvals, scammers offer credit repair “solutions” that only make matters worse.

What is a Credit Repair Scam?

A credit repair scam occurs when a bad actor makes false promises to a consumer about their ability to improve credit history reports or credit scores. Scammers target consumers with poor or blemished credit profiles, high debt loads, and those who are new to credit.

Crooks pretending to be legitimate credit counseling agencies charge upfront or ongoing monthly fees for services that do little or nothing to improve the victim’s credit. Sometimes, thieves will “waive” their fees but require that victims provide confidential personal data. Crooks use this information to commit identity theft.

Common Credit Repair Scam Scenarios

Criminals use a variety of tactics to lure victims into their credit repair schemes. As with most scams, these crooks target consumers in vulnerable situations. Ads, emails, and text messages entice consumers by falsely claiming that the company can:

  • Guarantee lower credit account payments
  • Improve the victim’s credit score if they add the company as an authorized user on at least one credit card
  • Help the consumer avoid auto repossession by completing a loan modification application
  • Have accurate information removed from reports using credit dispute letters

Scammers either never follow through with creditors to settle debts, lie about what they’ve done to help the victim, or intentionally provide misleading information to the victim about their ability to resolve credit issues. Credit repair scam scenarios can take many forms, with fraudsters often combining multiple aspects of different schemes.

Credit Repair Scam Red Flags

Hefty upfront fees and promises to reveal credit repair “secrets” that guarantee results are red flags indicating a credit repair scam. Other signs can sometimes be harder to detect. Here are a few red flags that could signal trouble. It might be a credit repair scam if the company:

  • Withholds details of the steps they will take to help repair your credit unless you enroll in their program
  • Provides template dispute letters that are supposed to remove accurate, current information from your credit reports
  • Discourages you from contacting credit reporting bureaus directly
  • Issues you a new “credit identification number” to open up new credit lines (These are often stolen Social Security numbers.)
  • Claims you can’t cancel your contract within three business days without paying a fee

Do You Suspect a Credit Repair Scam?

Reputable credit repair companies do exist. But if you believe you have been the victim of a credit repair scam, report it immediately to your state attorney general’s office and the Federal Trade Commission. These agencies work to stop consumer-related fraud.

Visit HawaiiUSA’s Security Center for more tips on protecting your HawaiiUSA accounts.

How to Improve Your Credit the Right Way

Clearing the way toward good credit is something you can do on your own or with the help of legitimate professionals. Start by catching up on past due bills and paying down high-balance accounts. HawaiiUSA members can also use free, confidential financial coaching to develop a personalized plan to improve their credit.