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How to avoid credit repair scams

If you're looking for a legitimate operation to repair your bad credit, proceed with caution. In a sea of credit repair companies, you'll find a lot of pirates.

It's best to try to improve your credit on your own, but if you're intent on working with a company, do your homework, says Clarky Davis, who writes the Debt Diva blog for CareOne Credit in Columbia, Md. "Check with the Better Business Bureau and your state attorney general to see if they've had any complaints registered against them."

Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling in Silver Spring, Md., says there are several tactics that scammers might use to try to improve your credit. One common scheme has scammers swapping your current Social Security number for a new one to give you a clean financial slate. But your Social Security number will connect them to all your accounts.

In another scam, they inundate credit bureaus with questionable "dispute" claims. The move would clear the claim from your file for up to 30 days, just long enough to snare better loan terms or a credit card. These plans are unethical, and they fail to repair the poor money habits that pushed you into serious debt in the first place.

Perhaps even more common is the do-nothing strategy. Schemers promise results, collect a fee and do nothing. And when a skeptical buyer checks in to see why he hasn't seen a change in his credit score, the credit repair firm has vanished.

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