The Federal Trade Commission is charged with the enforcement of consumer protection law and is responsible for shielding you and me against unscrupulous companies that unfairly garner our business through false claims and, quite simply, by breaking the law. With regards to credit repair scams, practices like these became so common that Congress passed a federal law to outline how credit repair companies can operate. The Credit Repair Organization Act (CROA) was passed to protect consumers and provide them with recourse if they are a victim of a dishonest credit repair company.

When researching credit repair companies, there are some glaring red flags that should alert you to steer clear. According to the FTC, avoid services that:

Accept Payment in Advance - Credit repair providers should not require payment prior to services being rendered. Under the Credit Repair Organizations Act, these companies cannot require payment until after they have completed the services promised.

Do Not Disclose Your Consumer Rights - Trustworthy credit repair organizations will inform you that you can order one free copy of your credit reports every 12 months from the credit bureaus, and that you are able to dispute questionable items on your own , free of charge. If a company does not alert you to this information, specifically in the form of a CROA required written disclosure titled "Consumer Credit File Rights Under State and Federal Law", take your business elsewhere.

Endorse Creating a New Credit Identity - Some shady credit repair clinics will advise you to create a new credit identity by creating and using an Employer Identification Number (EIN) in place of your Social Security number. This is a serious crime and if any credit repair company suggests this as an option, run the other way.

Misrepresent the Services They Can Provide - Watch out for credit repair companies that guarantee to remove negative and accurate items, such as late payments and foreclosures, from your credit reports. No one can guarantee that items will be removed, particularly if the items are true.