Nowadays we hear of credit scams on a regular basis. Victims of these credit scams are often left to try and sort it all out, which could be costly in both time and money. We will look at the more popular credit scams so that people may be better equipped to avoid or identify them.
Common Credit Scams
Repairing Your Credit
You will find many adverts in newspapers that tell you that they can clear your name of bad credit so that you will no longer be blacklisted. This comes at a fee, of course. So you end up paying the money over in the hopes of a simple solution and these scammers run off with your money never to be seen again. Nobody can alter your credit file and simply wipe away your bad credit record. The only way to do this is to pay off the debt that put you there in the first place. Should you not be able to pay a lump sum to cover your entire debt, you can contact debt rescue companies if there are multiple bad debt scenarios or simply contact the company who you owe the money to and ask to setup a payment plan.
Credit and loan companies offer credit insurance to clients to cover their loan in the event that they cannot pay it off as expected. This could be due to unemployment, death, health issues or disabilities.
There exist other companies who will offer clients credit insurance at reduced premiums than what you would typically get from your common loan and credit companies. This is a scam – you pay these premiums over to them and all seems fine but when you suddenly cannot pay off your loan due to unemployment or disability, these companies cannot provide you with the insurance cover that you were promised and you are then stuck with the debt.
To avoid this credit scam it is incredibly important to do your homework on the credit/loan company, and when it comes to signing the credit agreement, it should be optional to include insurance and there should be a policy in place in the event you wish to cancel the insurance.
File segregation is a credit scam where companies offer vulnerable and/or desperate people with a bad credit history a new identity so that they can take out a new line of credit. This is done by giving them a new Employee Identification Number and a new Social Security Number. You are then told to use these new numbers when you fill out a credit application. What people fail to realize is that this is actually considered a felony and can land them in a whole lot of trouble with the law.
By declaring bankruptcy you will have trouble obtaining loans for the next 10 years because it will remain on your credit history. However these scammers make it seem entirely impossible for you to get a loan and thus they draw you towards using a new social security number and buying into their scam. You can obtain loans during your bankruptcy period, it may be difficult but different companies have different credit criteria and you may get a loan with a higher interest rate.
Stealing your identity is done by obtaining your social security number and/or credit card details. People then apply for things such as credit cards and loans with your name and details and they may also buy things using this information. People only realize their identity has been stolen when they start getting called by credit and loan companies because ‘they’ have defaulted on their loans. In order to avoid this it is important to protect all of your sensitive information. Some precautions would be to request you credit report yearly, which is free to see that you don’t have some obscure marks against your name. Another thing to do would be to ensure that all paperwork, which contains sensitive information, is shredded or torn in to small pieces before being thrown away. If you identity has been stolen go to the Federal Trade Commission website for further instructions on how to proceed.
Lottery or Competition Scams
This credit scam is one I am sure many have experienced. You usually receive a text message or an email saying that you have won the lottery or some competition. You are usually prompted to pay a small fee using your credit card to claim your prize. This is where your credit card details are stolen as well as the money and you never see the supposed money you won. Legitimate competitions and lotteries will never ask you to pay a fee in order to claim your winnings.
Be Prepared And Alert
This list is but a few of the credit scams that exist out there today. One should always be alert and always question things that seem too good to be true. Research things thoroughly before you do anything.