At a Glance

Unfortunately, credit counseling scams are prevalent. These scams can defraud or destroy your credit, so here are the top five ways to spot a scam before falling victim.

What to expect:

1. It is extremely expensive

A telltale sign of a credit counseling scam is that they charge outrageous fees and require you to pay upfront for services. Do not fall victim to this, as the law requires credit counseling agencies to provide assistance before requesting payment. They will need to provide a credit report at least six months after they begin working with you before they can request payment. Monthly payments and any other form of payment before providing services are illegal.

Your credit counselor should also inform you of what you can do to help your credit for free. Some things you can do yourself, so they should provide you with these resources.

Credello’s brand-new credit counseling directory allows you to search through over 20,000 credit counseling agencies to improve your credit without getting scammed.

2. They overpromise

If they promise to give you perfect credit or remove negative information from your credit report, even if that information is accurate, it is a scam. Some might even promise to create a new identity for you using an employer identification number or a credit profile number rather than your social security number. Not only is this illegal, but it will not work to help your credit. Remember that even if you fall victim to a scam, you are held responsible for illegal activity.

At the end of the day, there is no fast and easy way to get out of debt and repair your credit. Debt takes a while to accumulate, and it will take a while to pay off. If they promise you a simple solution that will fix all your problems in a month, you should be very hesitant.

3. They do not explain your rights to you

By law, credit counseling agencies must give you a document titled “Consumer Credit File Rights Under State and Federal Law,” which highlights your rights and obligations. If the agency you are working with does not give this to you and explain it upfront, that should be a huge red flag.

Companies that are working to scam you do not want you to know the things you can do for free by yourself or explain that you can contact credit bureaus directly. By clouding people with misinformation, they position themselves as the only people who can help you repair your credit, which is simply not true.


filed a lawsuit against two of the largest credit counseling companies in the country, and Lexington Law, whom they said used deceptive practices to trick people out of money in 2019.

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4. They push their own programs

Credit counseling agencies should have your best interests at heart. If they are pushing all of their programs over things that would be the most beneficial to your credit, then you are getting scammed. These programs that they will likely name as quick fixes will cost money and not actually do anything to repair your credit.

Remember, these companies are concerned with making as much money as possible, so they will do anything in their power to convince you that their solutions are the only thing that will help. However, reputable credit counseling agencies advise you and give you resources you can use outside their agency.

5. The contract is difficult to understand

The contract you sign when agreeing to services should be straightforward. If the agreement is complex to the point where you need to know what you are paying for or what services are being performed, then run the other way. You have a three-day right to cancel at no charge, so do not let them trick you into staying or charging you a fee for canceling.

Like with anything, you should thoroughly read the contract before signing. If there are pieces in the contract that you need help understanding, ask for clarification. Find another company if the agency is unwilling to clarify or gives indecisive answers.

Use common sense and instincts when vetting credit counseling agencies. If it sounds too good to be true, it is.

Bottom line

Do not fall victim to predatory companies that promise you perfect credit and no debt for tons of money. Unfortunately, these companies target people in distress over their finances, making the situation much worse. If you feel you are getting scammed, report the company to the Better Business Bureau or the Federal Trade Commission.