Stay away from a credit repair firm that does any of the following:

1. Promises you the moon. Most negative information stays on your credit report for seven years; judgments and lawsuits are reported for seven years or until the statute of limitations runs out; bankruptcy remain for up to 10 years.

2. Advises you to dispute all negative information in your credit report. The company will flood the top 3 credit bureaus with letters disputing both inaccurate and accurate information. The theory being that most creditors will fail to respond within 30 days and that item will be permanently deleted.

3. Offers to help you get a new credit identity. The company tells you to apply for an Employer Identification Number or EIN number. Which has the same number of digits as a Social Security number. Then they instruct you to apply for credit using this and a different address. This practice, known as file segregation, is a federal and state felony.

4. Asks you to pay for credit repair before services are provided. This is a direct violation of the Credit Repair Organizations Act, which states that credit repair companies can't charge you fees until after they have completed the promised services.

The Credit Repair Organizations Act:

By law, credit repair organizations must give you a copy of the "Consumer Credit File Rights Under State and Federal Law" before you sign a contract. They also must give you a written contract that spells out your rights and obligations. Read these documents before signing the contract.

The law contains specific protections for you. For example, a credit repair company cannot:

1. Make false claims about their services.

2. Charge you until they have completed the promised services.

3. Perform any services until they have your signature on a written contract and have completed a three-day waiting period. During this time, you can cancel the contract without paying any fees.

Your contract must specify:

1. The payment terms for services, including their total cost;

2. A detailed description of the services to be performed;

3. How long it will take to achieve the results;

4. Any guarantees they offer; and

5. The company's name and business address.

Credit repair companies often make illegal or false claims to lure consumers. They target people with poor credit histories, particularly those with recent bankruptcies who may have difficulty getting new credit or loans.

These organizations falsely claim they can legitimately erase bad credit; remove bankruptcies, judgments, and liens; and create a new credit identity. Moreover, they charge fees Of $200 or more for legal steps you can easily do yourself.

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