At least once a month there is a story in the news involving various credit scams and their victims. If this happens to you, repairing the damage can be very time-consuming and inconvenient, so it’s important to avoid credit scams before you fall victim to them. This article will describe some of the most common scams and what you can do to protect yourself.
Key points to remember
- Credit scams are very common and require consumer awareness and diligence to avoid becoming a victim.
- Fraud can simply involve a loss of money, but many scams are designed to steal the identity of consumers.
- Common sense is often the best defense – never respond to someone posing as an authority over the phone or online asking for payment – especially by gift card.
- If you suspect fraud or think you have been scammed, you can file a complaintwith the Federal Trade Commission.
Credit Repair Scams
Ads in newspapers and on TV talk about credit repair services that promise, for a fee, to wipe out bad credit or fix bad credit. The problem with the promises made by these credit repair companies is that no one can legally remove negative credit information from a credit report. Most of the time, these companies collect thousands of dollars from people and just disappear with the money. The only legitimate way to fix bad credit is to pay off any debt owed.
If you can’t afford to pay off all of your debt, contact your creditors and ask them to set up a payment plan for your debt. If you’re having trouble making a payment plan with your creditors, contact a credit counseling agency. You can get a free copy of your credit report each year from each of the credit bureaus at http://www.annualcreditreport.com/. If there are any errors on any of your credit reports, contact the consumer reporting companies (Experiential, Transunion and Equifax) directly. Otherwise, if you don’t have time to contact all three credit bureaus and are willing to pay a fee, one of the best credit repair companies can do this on your behalf.
An advance loan scam usually involves a lender making false promises to interest. The lender often charges an upfront fee from the applicants to arrange these bogus loans. Sometimes the lender collects information from the applicants and applies for a legitimate loan. Later, the lender tells the applicant that the loan was refused and they disappear with the money and the identity of the applicant.
No one with bad credit can get low interest loans from legitimate lending institutions. Because they are not sure of the chances of getting their money back, creditors are reluctant to issue low interest loans to applicants with low credit. Usually the only way to get a loan if you have bad credit is to have higher interest rates.
Credit insurance scams
Credit insurance is offered by loan and credit card companies. The purpose of insurance is to protect debtors who cannot repay their loans or Credit lines in the event of death, disability, unemployment or health-related emergencies.
There are fraudulent companies that offer credit insurance at a lower price premium lending institutions would generally offer. The problem is that these scam organizations collect the premiums and never fulfill their obligation when the customer is legitimately unable to repay a loan. To protect yourself, make sure you research a business well and that when signing loan documents, make sure that credit insurance is optional and that a cancellation policy exists.
Individuals can set up automatic payment schedules with different companies so that various bills are deducted from bank accounts or collected from credit cards. This method of paying bills is very convenient and also very risky. There have been many situations where companies increase monthly fees or introduce new fees without notifying their customers. You have to be very diligent about bills and credit card statements. Taking the time to carefully check statements with known expenses can be a bit of a nuisance, but it will help you notice discrepancies earlier, which could go a long way in successfully disputing those payments.
Identity theft occurs when a person illegally obtains sensitive information, such as credit card numbers and Social security numbers (SSN) and receipts for borrowing, applying for credit cards or making purchases. When the scammer defaults on a loan, the true owner of the identity is contacted by the creditors and held accountable for the loans. TO avoid being a victim of identity theft, it is important to take care of personal information. Some preventive measures include:
- Review credit reports at least once a year. All three consumer information agencies are required by law to provide you with a free copyof your credit report once a year. Just go to http://www.annualcreditreport.com/ to start the process.
- Destroy all documents containing information such as account numbers and social security numbers. Buying a grinder is not very expensive and it will save you a lot of hassle.
- Consider using one of the best credit monitoring services to monitor suspicious activity on your credit reports. Several of these services also offer identity protection tools.
- If you are already a victim of identity theft, you can find instructions on how to file a dispute by going to the site Federal Trade Commission website.
File segregation is a system that provides a new credit identity to a person who has gone bankrupt on their credit report. Usually, the scammer offers the victim a new social security number or a new employer identification number (generally used by businesses) and asks the victim to fill out the loan documents using the new numbers. What the scammer does not tell the victim is that obtaining a new credit identity is illegal and punishable by law.
The crook lures the victims by saying that having declared bankruptcy makes it impossible to obtain loans and credit cards for up to 10 years. Even though a bankruptcy will in effect remain on your credit report for 10 years, you still have the option of obtaining loans. Different legitimate creditors have different criteria for choosing clients and they may offer a loan at a slightly higher price. interest rate than normal at someone who went bankrupt.
Phishing is a fraudulent process of attempting to acquire sensitive information, such as usernames, passwords, and credit card details, by impersonating a reputable organization in an email or by duplicating legitimate websites and tricking unsuspecting victims into entering their sensitive information. Here are some protective measures you can take:
- Beware of websites that appear from an email asking for sensitive information.
- Most banks and lending institutions have legitimate websites. If you need to do business with them online, go straight to the website by typing it in and don’t follow any links you are unsure about.
Phishing and Identity Theftscams often occur during tax time and can involve fraudsters pretending to be IRS-owned and demanding payment of unpaid taxes – often in the form of a gift card. The IRS saidthat they do not come into contact with taxpayers by phone, email or social media and communicate only through the US Mail.
If you are already a victim of phishing or if you suspect that a website you have visited is fraudulent, contact the real company and freeze your accounts if necessary. Also, be sure to change your passwords for all of your online accounts.
Some scam websites offer the Secret to Success or a list of legitimate work at home laundry jobs. Sometimes a company offers a job with the company and a “get-rich-quick” promise. Often times, the company asks for a fee and specifies that the fee must be paid online with a credit card. The company then steals the credit information and uses it for fraudulent purposes. If you need a list of work from home opportunities, there are websites that offer them for free. One fact that you should always remember is that no legitimate company will charge a fee for hiring you.
Online Dating Programs
Strange as it may sound, fraudulent activity is also perpetrated by online dating sites. The FTC estimated that consumers lost more than $ 200 millionto online dating programs in 2019. These sites typically charge a fee for their services, and in addition to collecting a fee, they steal user information from their services. There are both legitimate and scam dating sites out there, so always conduct a thorough investigation before choosing one and paying for these services online.
This scam occurs when a consumer receives an email message informing them of a lottery or contest that they may not remember participating in. The email often requires the consumer to pay a nominal fee using a credit card in order to access the earnings. The scammer collects the fees and the credit card number and disappears. No legitimate lottery transaction will ask a winner for any fees or information such as a credit card or bank account number.
Recovering from the effects of a credit scam can be slow and very tedious. As the saying goes, an ounce of prevention is better than a cure, so always be sure to protect yourself and any sensitive information. For more information on the various credit scams, how to protect yourself from them, and what to do if you are the victim of a credit scam, visit Federal Trade Commission website. You can also file a complaint with the FTC online.or by phone.