Avoiding Scams in Identity Theft
Turning to a business that offers help in solving debt problems may seem like a reasonable solution when your bills become unmanageable. Be cautious. Before you do business with any company, check it out with your local consumer protection agency or the Better Business Bureau in the company's location.
Ads Promising Debt Relief May Be Offering Bankruptcy
Consumer debt is at an all-time high. What's more, a record number of consumers-nearly 1.3 million in 1999-are filing for bankruptcy. Whether your debt dilemma is the result of an illness, unemployment, or overspending, it can seem overwhelming. In your effort to get solvent, be on the alert for advertisements that offer seemingly quick fixes. While the ads pitch the promise of debt relief, they rarely say relief may be spelled b-a-n-k-r-u-p-t-c-y. And although bankruptcy is one option to deal with financial problems, it's generally considered the option of last resort. The reason: it has a long-term negative impact on your creditworthiness. A bankruptcy stays on your credit report for 10 years, and can hinder your ability to get credit, a job, insurance, or even a place to live.
The Federal Trade Commission cautions consumers to read between the lines when faced with ads in newspapers, magazines, or even telephone directories that say:
- "Consolidate your bills into one monthly payment without borrowing"
- "STOP credit harassment, foreclosures, repossessions, tax levies and garnishments"
- "Keep Your Property"
- "Wipe out your debts! Consolidate your bills! How? By using the protection and assistance provided by federal law. For once, let the law work for you!"
You'll find out later that such phrases often involve bankruptcy proceedings, which can hurt your credit and cost you attorneys' fees.
Advance-Fee Loan Scams
These scams often target consumers with credit problems or consumers who have difficulty getting credit. In exchange for an up-front fee, these companies guarantee that applicants will get the credit they want-usually a credit card or a personal loan.
The up-front fee may range from $100 to several hundred dollars.
Recognizing an Advance-Fee Loan Scam
There are many fraudulent loan brokers and other individuals misrepresenting the availability of credit and credit terms. One of their favorite strategies is the "advance-fee" loan scam. That's where they claim to guarantee that they can get a loan or other type of credit for you-but you must pay a fee before you apply.
- Most legitimate lenders will not "guarantee" that you will get a loan or a credit card before you apply, especially if you have bad credit, or a bankruptcy.
- It is an accepted and common practice for reputable lenders to require payment for a credit report or appraisal. You also may have to pay a processing or application fee.
- Never give your credit card account number, bank account information, or Social Security number out over the telephone unless you are familiar with the company and know why the information is necessary.
Credit Repair Scams
You see the ads in newspapers, on TV, and on the Internet. You hear them on the radio. You get fliers in the mail. You may even get calls from telemarketers offering credit repair services. They all make the same claims:
- "Credit problems? No problem!"
- "We can erase your bad credit-100% guaranteed."
- "Create a new credit identity-legally."
- "We can remove bankruptcies, judgments, liens, and bad loans from your credit reports forever!"
Only a conscientious effort to repair and update your own credit reports, or a time-plan for repaying your debt will improve your credit history.
Every day, companies nationwide appeal to consumers with poor credit histories. They promise, for a fee, to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job. The truth is, they can't deliver. After you pay them hundreds or thousands of dollars in up-front fees, these companies do nothing to improve your credit report; many simply vanish with your money.
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