Credit Repair Companies vs Credit Monitoring Companies: Spotting a Scam

20 March 2016

One of the most tangible effects of identity theft is the damage it can do to its victims’ credit ratings. With fraudsters applying for new lines of credit, driving up debt-to-income ratios and making purchases they never intend to pay for, unsuspecting victims can be left with a rock bottom credit score and reckless credit history attached to their name.

Stuck in the ensuing financial bind, many ID theft victims turn to so-called “credit repair companies” with the hopes of hitting the “undo” button on their credit files and recouping their now-ruined borrowing reputation. These companies capitalize on their customers’ urgency, promising to re-establish their credit for a fee. However, what identity theft victims fail to realize is that by signing up for these services they are volunteering to be scammed yet again.

According to the Office of Consumer Affairs (OCA), credit repair companies have no more influence into what information goes into their customers’ credit report than the people who own the credit themselves, whether that information is fraudulent or authorized. Only creditors have the ability to change what makes up a consumer’s credit file. So, as long as the facts have been correctly reported, third-party companies cannot remove anything from your account.

If you spot incorrect information on your credit file, these records can be changed. However, it is often far easier and less expensive to take action yourself. First, be sure to review copies of your credit report from both credit bureaus, Equifax and TransUnion, as they can contain different sets of information. If the discrepancy proves legitimate, contact the appropriate bureau and inquire about its dispute resolution process.

The OCA urges you to beware companies that claim they can re-establish your credit for a fee. If you're considering turning to one of these companies for help, read through the OCA's guidelines first.

Credit monitoring companies, on the other hand, do not attempt to change the contents of a consumer’s credit report, but rather protect it. Credit monitoring services like Identity Guard work by helping consumers detect certain types of activity on their accounts that may indicate fraud. This way individuals can take proactive measures, such as requesting a fraud alert or credit freeze, to protect their credit from future threats before fraudsters have the chance to further damage their borrowing ability. Plus, if your identity is ever compromised, your credit monitoring service can provide guidance to help you cancel your credit cards, advise you on any next steps you should take with your lenders and local police, and give you the insight you need to help get back what you’ve lost.