Beware of credit-repair scams
By Dana Dratch • Bankrate.com

Thinking of paying someone else to clean up your credit file? Anything they can do, you can do better. And cheaper.

But it takes time and dedication.

If your report contains genuine errors (read: debts that have been on the report beyond the allowable time or debts that really aren't yours, not just debts you wish weren't yours), you can fix that yourself for free. And with a minimum of hassle.

But if the debts really are yours, the creditor can keep them on your report, usually for seven years. And no third party has the magic to make that go away. On the other hand, some for-profit credit repair firms offer a viable option by disputing items you believe to be inaccurate and pursuing the necessary paperwork and follow-up you may not be able or willing to do.

"Anyone who promises to get accurate information less than seven years old off a file is lying," says Gail Hillebrand, senior attorney for Consumers Union.

Some other red flags: companies that contact you, hard-sell tactics, outrageous promises and equally outlandish fees. "The standard line is that if it sounds too good to be true, it probably is," says Chi Chi Wu, staff attorney for the National Consumer Law Center.

Here's a rundown of several of the most popular approaches for separating consumers from their money with the promise of a better credit rating:

Scam No. 1: We have an in with the credit bureaus, speak their language or know some super-secret regulation or handshake that will make them delete the unflattering citations from your file.

What you need to know: There is no such thing. Some companies take the money and run. Others will deluge the credit bureaus with frivolous disputes of the debts in your file, says Linda Sherry, director of national priorities for Consumer Action.

The bureau may list the debt as disputed while it investigates, says Sherry. Debts may disappear during the short investigation (after which they will return), and the company will show this temporary "clean" report to collect its fee, she says.

Or, if the bureau realizes what the company is doing, it may simply ignore what it recognizes as bogus requests, says Joe Ridout, spokesman for Consumer Action.

In addition, the Credit Repair Organizations Act prohibits any company from taking money until after it does what it promised, says Susan Grant, director of the National Fraud Information Center. So if anyone is trying to bypass that federal law (or banking on the fact that you don't know about it) by getting you to send, charge or wire money, that's a bad sign. "The crooks always ask for money upfront," says Grant.