The Biggest Credit Repair Scam And How To Avoid It
Posted on 06 April, 2023 by Miranda Bottas in How-To
With nearly 370 million credit card accounts open in the USA and an almost unfathomable $14.9 Trillion dollars in total personal debt, it should be no surprise at all that the credit repair industry has been booming for quite some time. However, not all debt repair services are equal, and many of these companies employ illegal practices that trap consumers into unknowingly participating in criminal activity.
As an individual, if you've experienced hard financial times and fell deep into debt it's only natural to want to repair your credit as soon as possible. For many people - especially those whose financial burdens have eased - taking care of old debts and bad credit can be a top priority. With a sense of urgency and the willingness to repair your damaged credit report, it's not hard to be sucked into a credit repair scam that can cost serious and sometimes irreversible damage to not only your credit profile, but your personal life and even your freedom.
The Biggest Credit Repair Scam
There are a ton of credit repair companies who operate legitimate businesses, and can help you achieve a clean slate with some time and a little bit of work. But as we already mentioned, not all credit repair companies operate using legitimate processes. Over the last decade or so, there has been a major increase in shady credit repair companies who promise to clear up your bad credit in record time. The methods they use are fraudulent, unofficial and completely illegitimate - although they will often tell you otherwise (if they tell you anything at all).
The biggest scam of all is committed by companies or individuals offering to fix your credit by issuing you a CPN, or a "credit protection number" (also known as a credit profile number or a credit privacy number). Companies often charge you a lot of money for this, and then instruct you to use this number in place of your social security number when applying for credits cards, loan services, and even mortgages. This is without a doubt an illegal and completely fraudulent use of the CPN, and against the true intentional purpose.
The History of The CPN
When the credit privacy act of 1974 was passed, it prevented third parties from demanding a person to provide their social security number. From this law, CPNs were spawned - however - they were not and never have been issued to consumers by the federal government. While CPNs wallow in a legal grey area, there is little known about any real and legitimate need for them. In almost any instance where an individual would need to provide their social security number, it is because they are completing a form regarding financial or credit information - and using a CPN for this is completely against the law.
Since CPNs utilize a nine-digit format that looks just like a social security number, it is often easy for criminal businesses to prey on the ignorance of otherwise good-intentioned people by telling them that this new number is completely valid to use for anything they want - including bank loans, credit cards, and more.
Where Do CPNs Come From, and Who Issues Them?
As mentioned, CPNs are not commonly issued by any federal entity. Scammers create CPNs both synthetically and through identity theft. Synthetic CPNs are created using complex processes to create a false identity of someone who never actually existed. On the other hand, stolen or fraudulent social security numbers (often of children or deceased persons) are used by scammers as a replacement for the credit repair customer's social security number, since credit unions don't have up-to-date records on a young child, or someone who passed away 30 years ago.
Regardless of whether or not these numbers work, they are illegal to use for loan and credit purposes. Anyone who uses or attempts to use a CPN as their social security number to report income, present their identity to a lender is committing a felony act. If you're working with a company who attempts to issue a CPN, do not accept it and do not pay for the services or continue moving forward. You should immediately halt all communications with them and contact your local authorities. If you've already paid for the services, or if you've unintentionally found yourself to be a victim of a credit repair scam which uses CPNs, you should also contact authorities immediately to make a report. Failure to do so can lead to massive legal problems and severe punishments - including fraud, identity theft, and more.
How To Avoid Becoming a Victim Of CPNs
To avoid becoming a victim or unwilling participant in the CPN scam when attempting to repair your credit, be sure to use a reputable credit repair or debt repair agency who has a proven track record of delivering clean, honest, and legitimate practices. Always be sure to ask questions, especially regarding the details and tactics the company will be using throughout the credit repair process.
Additionally, no matter how desperate you are, only use qualified and licensed businesses. Purchasing a credit repair service or package from craigslist may seem tempting especially when offered at a seemingly very fair price, but you should avoid this at all costs. It's the only way to ensure that you, your identity, and your well-being won't be compromised. Keep in mind that during the credit repair process you'll be required to provide your personal information, and it's easy to be overwhelmed with the idea of rapid services which will often excite you and catch you off-guard. Before you know it, your money could be gone and your identity could be sold to the next scammer while your left without any means of resolving the situation.
Always guard your personal information and never provide it to someone who you cannot be sure is legitimate. Credit Repair is a big business, and you can make excellent progress using these services. But as with any popular financial service, there are always people waiting in the shadows to take advantage of the innocent.
Tips For Ensuring Your Safety When Using A Credit Repair Service
Check How Long They've Been In Business
A good credit repair agency should have a positive record and a business license or state/federal issued paperwork acknowledging that they are acting as a company or corporation, even if they've only been in business for a year or two. Don't trust anyone who tells you that their paperwork is in process, or that they only do this as a side job. These are big red flags.
Check Out Their Reviews Online
If the service provider is real, legit, and has done a good job for people, the reviews will be apparent. You can also check with the BBB, look for social media pages, and perform online searches to ensure that the name of the business you're dealing with isn't known for scamming, or, non-existent.
Call Them Or Visit Them In Person
If you find it difficult to identify whether the company you want to hire is legitimate, call them and ask about their process and how it works. Try to cross-reference this with industry standards. Additionally, if possible, use a local service with a physical location as it will be easier to verify the legitimacy of the company. You also might take your time to ask around for recommendations from friends, family members, or other people in your community. Never rush into agreeing to anything when it comes to finances, no matter how urgent the situation may seem.
If In Doubt, Simply Forget About It
If you cannot prove beyond a reasonable doubt that the services you're going to pay for are legitimate and legal, simply walk away. In this day and age, it's not hard to verify the record (or lack of record) regarding a business. If the names don't match up, if the phone numbers don't match up, or if the employees (or sellers of the service) act nervous or evasive when they're asked basic questions, it's not a good sign. Always chose to protect yourself rather than take a risk that you could end up regretting.
Using a CPN is no joke, and it is the number one credit repair scam that we know of. We've even heard about instances where individuals who work at legitimate credit repair businesses try and sell "expedited" packages for cash, behind the back of their employer by using CPNs on trusting customers. If you are ever offered a CPN to repair your credit, know and understand that it is absolutely not acceptable.
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