They are seen or heard everywhere from newspapers and radio to television and the Internet. These ads offer to erase negative information on your credit file-for a price. Have you read any advertisements like these that guarantee to fix your credit report? "Credit problems? No problem!" Or, "we can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!" If you thought they sounded too good to be true, you may have been right.

Credit repair companies can do no more for your credit legally than you can. And though they can't provide you with a clean report, some may encourage you to violate federal law. These credit repair operations work by seeking out consumers who have been denied loans or credit based on their poor credit histories, or people who have filed for bankruptcy. These repair companies promise to provide consumers with instructions on how to develop a new credit identity. This method of credit repair is called "file segregation."

In this file segregation scam, the so-called credit repair companies recommend that you get an Employee Identification Number (EIN) or Individual Taxpayer Identification Number (ITIN) and they encourage you to use it in place of your true Social Security number, which is illegal.

To learn more about file segregation you can refer to the spring 1998 CreditCheck Newsletter article "New Credit Repair Scam Could Lead You to Commit Fraud." It's available in our Members' Only area in the CreditCheck newsletter archive at http://www.consumerinfo.com/n/s98_a.htm .

In February of this year, the office of the Treasury's inspector general for tax administration arranged over one hundred investigations of credit repair companies and individuals that sold or used the employer identification numbers to defraud creditors. This sting operation resulted in numerous charges such as misrepresenting a Social Security number, mail fraud and conspiracy.

The Federal Trade Commission (FTC) and the National Association of Attorneys General announced legal action against many of these credit repair companies and are warning consumers to use their better judgments before paying for such useless services. Be wary of any company that claims they can provide you with a "brand new" credit file.

The Treasury's inspector general for tax administration has conducted over one hundred investigations of individuals who sold or used employer identification numbers to defraud creditors. This investigation has resulted in 58 charges stemming from misrepresenting a Social Security number to mail fraud and conspiracy. The office is still investigating over two hundred additional people who have illegally submitted information in regards to obtaining an EIN number as the credit repair company instructed them to do.

These scam tactics are expensive for both businesses and consumers. The Treasury's tax administration inspector general has estimated that nearly $400 million in fraudulent loans and credit has been established across the country, a cost that often is absorbed by the businesses providing credit, and eventually by their customers.

Remember that no one can legally remove accurate information from your credit report. But, the law does allow you to dispute information in your file that is either inaccurate or incomplete. You must identify each item in your report that you want to dispute, explain the reason why you are disputing the information in question, and then request a re-investigation into your file.

If all the information turns out to be accurate, the only cure for negative information on a credit report is time and keeping your payments current. The accurate but negative credit information will be removed from your credit report after seven years from the time it first appears. In the case of bankruptcy, the information may remain on your credit report for up to 10 years.

This law prohibits credit repair companies from charging a fee until their services have been performed. It also requires them to tell you about your legal rights. They must provide a written contract that details what services are to be performed, how long it will take, the total cost of the service and any guarantees that are offered. According to this law, these contracts must also explain that consumers have a three-day grace period to cancel the service at no charge.

Under this law, you have the right to sue in federal court if the company defrauds you. It allows you to seek your actual loss or the amount you paid the company-whichever is more. You can also attempt to claim punitive damages: an amount of money to penalize the company for breaking the law.

The Credit Repair Organizations Act also allows a class action suit in federal court: cases where groups of consumers can file jointly with one lawsuit. If you win, the other side has to pay your attorney's fees.

Find out what your state laws are regarding credit repair companies. Some may be helpful if you've lost money to a credit repair scam.

If you've had a problem with a credit repair company:

• Report them as soon as you feel you are being scammed. Contact your local consumer affairs office or your state attorney general (AG). Many AGs have a toll-free consumer hotline.
• If you wish to file a complaint with the FTC, contact the Consumer Response Center by phone at 202-FTC-HELP (382-4357); if you're hearing impaired you can reach them at 202-326-2502, or by mail at Consumer Response Center, Federal Trade Commission, 600 Pennsylvania Ave, NW, Washington, DC 20580. There's also an online complaint form at http://www.ftc.gov . Although the Commission cannot resolve individual problems for consumers, it can act against a company if it sees a pattern of possible law violations

Don't become a victim of a credit repair scam. You can do everything a company can legally do, and you can do it for the cost of nearly nothing.