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| Beware of credit-repair scams |
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Scam No. 5: Call our handy 900-number for details
on how to fix your credit.
What you need to know:
This is a subscam that can be combined with any of the others. While
you are looking for help, the con artists are looking to keep you
on the line as long as possible and make money from the per minute
charges, says Ridout.
Look out for yourself.
Scammers are often vague on details. If you have trouble defining,
understanding or explaining the plan for cleaning your credit, that's
a bad sign.
Also, "any offer of guaranteed credit is almost certainly
to be a fraud," says Ridout. Ditto quick-fix promises. And
beware of nameless, faceless entities. Legitimate counselors will
usually want a face-to-face meeting to go over all your financial
details and their assistance usually includes some financial education,
he says.
Some questions to ask:
- Who is proposing the plan? "A lot of these companies
will have a lot of claims against them," says Loonin. Vet
anyone before you accept financial information, especially if
you have money trouble.
- Has this entity had problems before?
Call your state's regulatory or consumer offices to see if there
are any complaints or actions against them. Don't forget to check
in with the company's home state if it's based elsewhere. And
run the business and names of the principals through a couple
of search engines to see if there are problems.
- How are they paid, how much and when?
Since you can do your own credit repair for free, that's your
basis of comparison. If you need a repayment plan or guidance,
an organization affiliated with the two main nonprofits, the National
Foundation for Credit Counseling and the Association
of Independent Consumer Credit Counseling Agencies, can help
you for a nominal fee, not hundreds or thousands.
- What's the downside of this plan?
Genuine credit counselors are careful to present the positives
and negatives behind any plan. Scammers tend to focus on selling
the upside.
- Did you contact them or did they contact you? If someone
is trying to sell you, that's a sign to put up your guard.
- And, finally, what's the reason for not doing this yourself?
"There is nothing they would be able to do that you can't
do," says Grant. "They don't have any secret in with
the credit bureaus or secret magic wand that you can wave."
Some things are legal but still dangerous.
When it comes to credit repair, sometimes consumers sign on for
items that aren't scams -- just costly mistakes. Two examples:
- Refinancing the home to pay off credit cards: If you're tapping
equity to pay off credit debt, think again. What you're doing
is raising the stakes and risking your home. When you're having
money trouble, the smart move is always to keep the mortgage low
and pay it first. Never trade unsecured debt (your credit cards)
for one backed by an asset (your house). With the former, you
might get a few dings in your credit rating. With the latter,
you could literally lose your home.
- Paying for copies of your credit report:
You're entitled
to a free copy of each of your reports annually. Watch out
for sites and services that charge for it, or bundle the service
of supplying a report with ongoing credit monitoring for a fee,
says Wu.
Dana Dratch is a freelance writer
based in Atlanta
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