Credit sweeps are a heavily advertised and promoted service among credit repair companies. Unfortunately for many unsuspecting consumers looking to improve their credit, the credit sweep is a fraudulent and illegal practice.
John Ulzheimer, one of the nation’s most prominent credit experts, explains why you need to watch out for credit sweep scams in an episode of Credit Countdown.
Disclaimer: The views and opinions expressed in this article are strictly those of John Ulzheimer and do not necessarily reflect the official stance or position of Tradeline Supply Company, LLC. Tradeline Supply Company, LLC does not sell tradelines to increase credit scores and does not guarantee any score improvements. Tradelines can in some cases cause credit scores to go down.
Credit Repair: Legal vs. Illegal
To be clear, credit repair as a whole is not illegal. Credit repair—the legal kind at least—is simply the process of removing inaccurate or unverifiable information from a consumer’s credit report. This is done by disputing the negative items with the credit reporting agencies (CRAs, AKA credit bureaus). Alternatively, credit report information may be challenged through the financial institution that is furnishing the data to the CRAs.
Credit repair is legal as long as it complies with federal and state rules and laws that govern the industry of credit repair.
Hiring a Credit Repair Company to Fix Your Credit
Although the credit dispute process is free, credit sweeps are sold to consumers by credit repair companies, who charge a fee to try to get negative information removed from the consumer’s credit reports.
Although trustworthy credit repair professionals do exist, there are also plenty of “scumbags,” in John’s words, in the industry who take advantage of consumers and use illegal and fraudulent practices to make money.
For this reason, it’s extremely important to do your due diligence before deciding to work with a credit repair company.
The Credit Dispute Process
Typically, the credit repair process involves sending letters on behalf of consumers to challenge the validity of the data in question and ask the CRAs to validate the items. This process is not illegal; it is commonly used and has been around for decades.
Disputes Under the Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA) gives you the right to dispute information on your credit reports that you believe to be incorrect. If you do challenge an item on your credit report, the credit bureaus are required to perform an investigation. They then look into your claim and determine if the dispute is valid or if the challenged information can be verified as correct.
Section 605B of the FCRA
Section 605B of the FCRA is a section that is entitled “Block of Information Resulting From Identity Theft.”
This section of the FCRA states that if you have been the victim of identity theft and someone else has fraudulently opened accounts in your name, then you have the right to have the fraudulent information resulting from identity theft removed from your credit reports.
In addition, in the event of identity theft, Section 605B obligates the CRAs to do two things that are not normally required as a part of removing negative information:
They have to remove the fraudulent information from your credit report within four business days of receiving all of the valid documentation that proves identity theft has occurred. This is a very short period of time in comparison to the 30-45 days that are typically allowed for the credit bureaus to complete their investigations and remove the information.
They have to block the information from ever appearing on your credit reports again.
Scammers have abused this section of the FCRA by selling a service that takes advantage of these policies even when identity theft is not the cause of negative information appearing on someone’s credit report.
What Is a Credit Sweep?
This particular scam that disreputable credit repair companies often engage in is called the credit sweep.
The goal of a credit sweep is to cause the credit bureaus to remove negative information from your credit reports prior to the time that they are legally required to do so. The FCRA mandates that negative information must be removed from a credit report after seven years (with the exception of a Chapter 7 bankruptcy, which can stay on your credit report for up to 10 years).
A credit repair company tries to get the negative marks deleted from your credit report immediately rather than waiting until it is seven years old, when it will automatically be taken off of your credit report.
How Do Credit Sweeps Work?
The way a credit sweep works is the credit repair company asks you to pretend that you have been the victim of identity theft so that they can get the credit bureaus to remove accurate, valid negative information from your credit report.
The credit repair company has you go to an enforcement agency such as the police and file a police report claiming that your identity has been stolen. They can then show the identity theft report to the credit bureaus as “evidence” that the negative information on your credit report is there as a result of your identity being stolen.
If the credit sweep is successful, the CRAs have to remove all of the implicated negative information within four business days and prevent it from ever reappearing on your report, thus “sweeping” all the negative items off of your credit report.
Credit Sweep Fraud
As John puts it, it is clear that credit sweeps are fraudulent and illegal.
Not only are you lying to the CRAs, but also to the police, and filing a false police report is against the law.
In addition, lying to the credit bureaus and then defaulting on your credit obligations can land you in court, criminally charged with fraud.
Conclusions on Credit Sweeps
Is it worth it to try to fix your credit by purchasing a credit sweep and possibly being prosecuted for fraud? Or is it a better idea to pay your bills on time so that negative information does not hit your credit report in the first place? It’s up to you to consider the pros and cons.
If you learned something from this article, please share it so that others can be aware of the dangers of credit sweep scams.