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Most of us would love a higher credit score! Higher scores usually mean lower rates on loans, savings on insurance and more loan options. And while this goal of increasing your credit score is doable, it does take time and dedication. So why not just pay someone to raise your score and remove any negative information that's decreasing it? Sounds a little too good to be true, and it can be. These credit repair scams take your money and send you on your way without ever improving your credit score. 

How can you avoid a credit repair scam

You can recognize a credit repair scam in a few different ways. One would be that they pressure you to pay up-front fees before they even provide the service. Never pay upfront. Under the federal Credit Repair Organizations Act, credit repair companies cannot request or receive payment until they complete the service they have promised. They may even structure monthly payment plans to get around this requirement, but upfront payment for services is illegal according to the Consumer Financial Protection Bureau. 

Second, you will know it's a scam if they promise to remove negative information from your credit report even if that information is accurate and current. This simply doesn't happen, no one can do this. They may also request that you dispute accurate information which again, does not remove it from your report. You can only remove incorrect or outdated information, more on that below. 

Third, they do not explain your rights to you and what you can do for yourself for free. If there is an error on your credit report, you can dispute it for FREE under the Fair Credit Reporting Act. You do not need to pay someone to do it for you. Also, they should let you know that you have the right to cancel your contract with any credit repair organization for any reason within three business days at no cost.

Finally, they may tell you not to contact the credit reporting companies directly. This is another red flag! If they tell you not to contact Experian, TransUnion or Equifax directly, don't move forward with this credit repair company. 

How can you help improve your score

So now that you know what to look out for with credit repair scams, what can you do to actually improve your credit?

First, check your credit report at all of the credit reporting companies and make sure the information on the report is accurate. You can do this for free at https://www.annualcreditreport.com/.

You also have the legal right to dispute errors in your credit report for free. The FTC has a page dedicated to disputing errors, including the steps you should take and a sample letter: https://consumer.ftc.gov/articles/disputing-errors-your-credit-reports. Again, this information is free for you to use and there is not charge to dispute incorrect information. 

Next, understand what generally makes up a credit report and what you can do to improve in those areas:

• Your payment history makes up about 35% of your score and paying your bills on time can help improve your score.
• Next is amounts owed or use of available credit, which makes up 30%. Don't max out your credit cards or use all the credit available to you. Ideally, you should only be utilizing around 1/3 of your credit available.
• Length of credit history is 15% percent, and not something you can change quickly, just have patience! This is why it is important for young adults to learn about credit and start their credit history as early as possible. Credit scores take time to build. 
• The final two factors are both 10% each, types of credit used/credit mix and new credit. It's good to have a mix of loans and credit cards, but be careful not to extend yourself too much. Also, don't apply for new credit too often as that can ding your score. 

If you would like to talk with someone about your credit score and get individualized recommendations for your unique financial situation, we partner with GreenPath Financial Wellness to offer free, one-on-one financial coaching and credit report reviews.

GreenPath has certified financial experts and is approved by the U.S. Department of Justice as an approved credit counseling agency. You can give them a call at 877-337-3399 to start your credit report review or fill out this form to have them contact you. Your call is confidential and free.

If you would rather do online training, GreenPath has a free Learning Lab with many different financial wellness courses including A1 Credit Tool, Making the Most of Your Money and Debt Repayment Options. 

While it may be tempting to use a credit repair agency, especially if you find yourself in a tough situation where you need a higher score quicly, always research the company and protect yourself from scams. Keep in mind the red flags above when reviewing the agency or contact GreenPath. We wish you the best on your credit score improvement journey and remember that all good things come with time!  

Information from the Consumer Financial Protection Bureau and the Federal Trade Commission.