Credit Repair Scams Hurt Prospective Homebuyers

So you want a mortgage to take advantage of record-low interest rates, but your credit score is low? Then you stumble upon a possible solution: a credit repair company that claims it can fix your credit. Not so fast.

Regulators and consumer advocates alike are warning Americans about a growing number of credit repair scams nationwide. Just this month, the Federal Trade Commission reached a $14.4 million settlement with a Florida-based credit repair agency, which made big promises to consumers and offered little in return.

The FTC's actions were part of a larger, two-year crackdown, called Operation Clean Sweep, in which the FTC has joined with 24 different state agencies to clean up the credit repair business.

Since 2008, the FTC has charged at least 36 credit repair businesses with making bogus claims and/or cheating consumers out of money.

Most of the companies targeted by the feds were guilty of collecting upfront fees for credit repair services, or telling consumers things like: "We can scrub your credit report clean and get rid of all negative information."

So even if you need to improve your credit for a home loan (see AOL Real Estate's guide on Credit Scores and Home Buying) or for any purpose, read carefully when dealing with a company that promises to boost your credit rating. Here's why: