If you apply for car loans online, you might find bad credit prevents you from qualifying. You need a new car but it's hard to get cars without car loans, and you need credit to get loans! Online searches quickly reveal thousands of companies that promise they can erase all of your credit problems like magic, but do they really?

Most of these companies use scams that not only don't really clean up your credit, but can do serious harm to your finances.

Scam #1: Dispute the Claims

You can challenge negative credit information with the credit reporting agency. They then must investigate and confirm the information within 30 days. During this period, the black mark is taken off of your report. Once verified, it will reappear.

The credit repair company challenges all bad credit information even if it is accurate. These incidents are temporarily removed from your report and, for 30 days, your credit history appears clean.

After 30 days, they do it again. They keep challenging all information on your credit report so that the credit reporting bureaus have to keep suspending this information off of your report.

The credit repair company charges you a hefty fee every month for providing this service, of course.

The Reality Of This Scam:

Your report is not actually clean. In fact, this borders on fraud because it is a deliberate attempt to mislead future creditors when applying for car loans online.

Scam #2: The "New" Social Security Number

The other common scam is when a company claims they can get you a new Social Security number (SSN) that will be clean. All of your bad credit information is on your old SSN so new creditors can't see it. You get a clean slate and can start over.

The Reality of this Scam:

Again this is basically fraud, but there is a more serious consequence to you.

You do not get a new Social Security number. The Social Security Administration issues new numbers only in the event of severe identity theft, and even then only rarely. Instead, you get an Employer Identification Number (EIN) which looks like a Social Security number and acts like one except for at least one important exception.

A Social Security number is, not surprisingly, tied to your Social Security earnings. If you do all of your business under an EIN, all of your earnings get reported on the EIN and are therefore not eligible for Social Security reporting.

Suddenly at 65, you discover that you get virtually no Social Security income because they don't show you have earned income since you switched over to the EIN.

There Is Only One Way to Repair Credit

If you have made mistakes in your past, you can repair your credit but it will take time. You will have to start small and may even have to start with secured loans. A car may not be in your immediate future, but a set of tires might be. However, there are also car loans online designed for borrowers with bad credit, though you will have to accept higher interest rates.

Rebuilding your credit it is a matter of steadily making your payments every month without exception. It will take time, but if you demonstrate that you are a good credit risk, you will slowly rebuild your credit and find better deals for car loans online.