With over a million Americans filing for bankruptcy each year, and with household debt at record highs, consumers are reaching out to "credit counselors" and "credit repair" companies with increasing frequency. Although there has been a recent surge in the number of these organizations that are available to offer help to consumers, there has also been an increase in the number of unscrupulous operators who are ready to take advantage of unsuspecting debtors. Following are some tips on avoiding credit repair and credit counseling scams.

Credit Repair Scams

Every day, companies appeal to consumers with poor credit histories -- promising, for a fee, to clean up their credit reports so they can get a car loan, a home mortgage, insurance, or even a job. The truth is, after consumers pay hundreds (or even thousands) of dollars in up-front fees, these companies do nothing to improve the debtors' credit. Worse yet, many "credit repair" companies simply vanish with the unsuspecting consumers' money.

The red flags that should alert consumers to credit repair scams include:

• The company wants the consumer to pay for credit repair services before any services are provided.

• The company does not inform consumers about their legal rights, and actions they can take themselves -- for free.

• The company recommends that consumers not contact a credit bureau directly;

• The company suggests that consumers try to invent a "new" credit report by applying for an Employer Identification Number to use instead of their Social Security Number.

• The company advises consumers to dispute all information in their credit report, or take any action that seems illegal, such as creating a new credit identity. If consumers follow this illegal advice and commit fraud, they themselves may be subject to prosecution.

Credit Counseling Scams

As in credit repair scams, some so-called "credit counselors" prey on overwhelmed consumers, promising "a clean slate" (often for a flat, up-front fee). Some counselors promise to contact creditors and convince them to accept lower payments, or to charge lower fees and interest rates. In many cases, unfortunately, the only ones who end up in better financial shape as a result of these "efforts" (or the lack thereof) are the counseling organizations themselves, while the consumers are left with even fewer resources as a result of high fees and more delinquent debts.