Skip to main content
Credit Repair Scams and Choosing a Credit Counselor

Credit Repair Scams and Choosing a Credit Counselor

Many Michigan residents’ credit scores took a dive during the pandemic. Advertisements for credit repair help may sound inviting. The claims are familiar: "Credit problems? No problem!"... "Remake your credit in 30 days!"... "Erase bad credit - Guaranteed!"... "Create a new credit identity - legally!"

There are no quick or easy cures for a poor credit history. You can't buy good credit. Don't be taken in by offers for a miraculous credit repair fix. Research your options before deciding to work with a credit counseling agency. Then carefully select a trustworthy agency that offers personalized services from trained counselors.

Recognizing a Credit Repair Scam

You should beware of companies that promise to clean up and fix your credit report for a fee. No one can legally remove accurate and current negative information on a credit report.

Here are some tell-tale signs that a credit repair offer is too good to be true.

  • You are required to pay for credit repair services up-front before any services are provided. The federal Credit Repair Organizations Act and Michigan Credit Services Protection Act have rules. One keeps a credit repair company from requiring payment until the company has completed the services promised.
  • The company claims it can get rid of most or all negative credit information in your credit report. Even if the information is accurate and current. Consumer reporting agencies are allowed to report most accurate negative information for seven years. They can report bankruptcy information for ten years.
  • The company suggests that you create a “new” credit identity. And then a new credit report. They tell you to do this by applying for an Employer Identification Number. This number will be used instead of your Social Security number. Keep in mind that it is illegal to:
    • lie on a loan or credit application;
    • misrepresent your Social Security number; or
    • obtain an Employer Identification Number from the Internal Revenue Service under false pretenses.
  • You are advised to dispute all information in your credit report, regardless of its accuracy or age. Accurate and current credit information cannot be legally removed from a credit report.
  • The company also promises guaranteed results. Guaranteeing or stating that the company can delete negative credit information that is not inaccurate or old is illegal. The Michigan Credit Services Protection Act does not allow such actions. 

Know Your Rights

If you respond to a credit repair offer, know that you have the right to:

  • Not be charged until the credit repair organization has completed the promised services.
  • A copy of the one-page document called Consumer Credit File Rights Under State and Federal Law. This document outlines your rights for challenging inaccurate information on your credit report. It should also contain your rights in dealing with credit repair organizations.
  • Cancel a contract with a credit repair organization for any reason. This must be done within three business days from the date the contract was signed.
  • A written contract that spells out your rights and obligations concerning the credit repair organization. You should be given this before the company provides any services.

For More Information and Self-Help Credit Repair

Federal law allows consumers to ask for an investigation of information on their credit report. Learn how to legally improve your credit report, how to deal with debt, and how to spot credit-related scams. The information can be used to challenge inaccurate or incomplete information. There is no charge for this. Some people hire a company to investigate on their behalf. You can do for yourself many of the tasks a credit repair clinic can do legally at little or no cost.

Attorney General's Consumer Alert, “Free Credit Reports – What Consumers Should Know,” has an abundance of useful information. It includes information on how to order your credit report and what to look for when reviewing it.

Please review these Federal Trade Commission publications. They provide information on how to request an investigation to dispute information on your credit report and improve your credit worthiness.

Choosing a Credit Counselor

Credit counseling can be a lifesaver in addressing financial problems. But it must be done by a reputable organization. The right credit counselor can provide personalized advice on managing your money and debts. Unreliable or ineffective credit counseling offers are everywhere due to the rise in consumer debt. These offers can leave you in a worse financial position. Choosing a credit counselor should be done with care. 

Credit Agency Cautions:

  • Check that the organization will help you manage your finances better through counseling and education. Find an organization that offers in-person counseling.
  • Carefully read through any written agreement that a credit counseling organization offers. It should describe in detail:
    • the services to be performed;
    • the payment terms for these services, including their total cost;
    • how long it will take to achieve results;
    • any guarantees offered; and
    • the organization's business name and address.
  • Beware of high fees or required “voluntary contributions.” These may add to your debt when added to monthly service charges. They may also defeat your efforts to pay your bills.
  • Make sure your creditors are willing to work with the agency you choose. Follow up with creditors regularly to make sure your debt is being paid off.
  • Check with state agencies and your local Better Business Bureau. Get information about a specific credit counseling organization's complaint record.
  • Avoid offers that arrive “out of the blue.” These may come by phone, email, or direct mail. Also avoid offers that make unrealistic promises that sound too good to be true. Promises to “help you get out debt easily.” Or settle your debt for “pennies on the dollar” are a red flag.
  • Conduct independent research. And verify company claims.

Additional Resources for Choosing a Credit Counselor

Please refer to the following FTC publications: 

Consumers may also get free information from the Federal Trade Commission by calling toll-free: 877-FTC-HELP (877-382-4357); TTY: 866-653-4261. Please refer to the Department of Justice website for a list of IRS-approved counseling agencies. Consumers can search by state.

If you have a consumer complaint, you may contact the Attorney General's Consumer Protection Team at:

Consumer Protection Team
P.O. Box 30213
Lansing, MI 48909
517-335-7599
Fax: 517-241-3771
Toll free: 877-765-8388
Online complaint form