Desperate consumers increasingly fall for unrealistic promises from companies that claim they can repair your credit. Instead, consumers are often left with no change in their credit status, despite paying a large, up-front fee.

In Indiana, Attorney General Greg Zoeller has sued two credit repair companies he says defrauded consumers in his state.

"To take money from economically-struggling people with the promise of fixing their bad credit and then provide them no real help and leave them in worse condition is beneath contempt, Zoeller said. Individuals who defraud Hoosiers in this way will face aggressive enforcement by my office.

Zoeller's suit targets two companies operating within Indiana's borders, but credit repair companies usually target consumers nationwide, using heavy advertising on cable TV, radio and the Internet.

Red flags

How can you tell if a credit repair company is really a scam. Zoeller offers five dead give-aways:

1. The company wants you to pay for credit repair services before they provide any services.

2. The company doesn't state your rights in its contract or explain that you can receive services for free.

3. The company recommends that you don't contact any of the three major national consumer reporting companies (Equifax, Experian, and TransUnion) directly.

4. The company tells you they can get rid of most or all the negative credit information in your credit report, even if the information is accurate and current.

5. The company suggests you apply for an Employer Identification Number to use instead of your Social Security number so you can invent a "new" credit identity -- and then, a new credit report.

"We recommend that consumers who need credit counseling avoid for-profit companies, since there are legitimate non-profit credit counseling services available," Zoeller said.

The National Foundation for Credit Counseling certifies legitimate non-profit credit counseling services.