People who are having a serious problem with debt can become very desperate. And, unfortunately, desperate people can become gullible – falling for the next scam that comes along that promises fast help. The Internet has made our lives much easier in many respects. But it has also become a haven for swindlers, con artists and scoundrels who perpetrate a scam under one name, close up and then open up again a few months later with a new name. Most of us are familiar with the Ethiopian prince scam, which is where someone pretends to be a deposed Ethiopian prince who stands ready to transfer millions of dollars to you if you just provide your bank account information. But there are also less obvious scams aimed at extracting money from people who are desperate to deal with their debts. Here are six of the most common ones to watch out for.
The we can remove negative items from your credit report scam
Let’s say that you have a credit score of less than 500 because of negative items on your credit report such as accounts that have gone to collection, numerous late payments, a lien or a default. You go online and find companies who promise that they can repair your credit by removing these items from your credit reports. The truth is that no company can remove negative items from your credit report if they’re legitimate. If you do have an account that’s gone to collection or a default it will stay in your credit reports for seven years regardless of what any company might want you to believe. It might sound mightily attractive to have that negative stuff off your credit report but the only thing that will actually be removed is money from your wallet.
Here’s a video about credit repair scams where the sponsoring company isn’t conning you but it’s also not being entirely forthright. It talks about the items it’s been able to remove from its clients’ credit reports but never reveals that the reason they were able to get them removed is because they were errors, which is something you could do yourself and at no cost. Remember what we said – there’s no way to get negative items removed from a credit report if they are legitimate.
The we’ll of loan you money to get out of debt scam
This one is more difficult to spot because there are legitimate companies that will loan you money to get out of debt. However, there are also some “fraudsters” who will tell you that they’ve created a loan and paid off your debts when they do no such thing. You might send one of these companies payments on that nonexistent loan for five or six months before you learn they’ve not paid your creditors a single cent. You will have just as much debt as before, plus you could be out hundreds or even thousands of dollars.
The debt settlement scam
This one is also more difficult to spot because there are many ethical, legitimate debt settlement companies. The ones you need to watch out for are those that charge big upfront fees. They will promise you the moon – that they can reduce your debts to pennies on the dollar. You pay those huge fees upfront and then find a number of months later that not one of your debts has been settled. But by the time you learn this, the fake debt settlement company has closed its doors and moved on – with your money.
The we’ll lower your credit card interest rates for you scam
This scam usually begins with a Robocall where a company promises to lower the interest rates on your credit cards. These calls are not only a nuisance but the companies behind them are ripping off consumers. What they do is charge enormous upfront fees with the promise that they will work with your credit card companies to reduce your interest rates, which is something you could actually do yourself.
The advance-fee loans scam
If you can’t get a loan because of your credit history, this scam can be very appealing. It’s where a company contacts you and promises that for an advance payment (the advance-fee) it can get you a loan even if you have bad credit. Some of these shysters make their money by using 900 numbers, while others charge a fee but never get you the loan.
The home equity scam
These scam artists target people who have good credit but a bad cash flow. They will offer credit that’s based not on the ability to repay or your income but on the amount of equity you have in your home. These unscrupulous individuals will try to take advantage of you by using abusive practices such as “loan flipping” by talking you into repeatedly refinancing the loan, which does nothing but add to the cost of your debt. What ultimately happens is that you get to the point where you can’t make your monthly payments anymore and lose your house.
How to avoid these con artists
The first and best way to avoid getting scammed is never rush into anything. No matter how good the deal might sound, at least sleep on it. If you wait 24 hours, it may not seem as great as it did initially. One of the tricks these people use is called “scarcity.” They will try to convince you that if you don’t act immediately, you will lose the help being offered. Just sit on it for a least a day.
Second, check out the company before signing anything. Regardless of whether it promises to get your interest rates reduced or loan you money to pay off your debts, be sure to research it thoroughly. Look for factors such as how long the company’s been in business and whether the Better Business Bureau has accredited it. You should also see if it belongs to some legitimate organizations like the US Chamber of Commerce and the American Fair Credit Council. Also, spend some time looking for reviews of any company with which you might do business. Almost every company that’s involved in debt and credit will have some negative reviews – it’s just the nature of the beast. But if you find there are many more negative reviews than positive ones, stay away from that company. Finally, you might contact your local Better Business Bureau to see how many complaints there have been about the company.
Get everything in writing
Never accept anyone’s verbal promise to do something for you., Whether it’s a debt settlement company, a credit repair company or one that promises to reduce your credit card interest rates, get everything in writing. And don’t sign anything until you’ve carefully reviewed all the documents you’ve been sent. Make sure you read any terms and conditions because as they say in the advertising business, “the big print giveth and the small print taketh away. So don’t ignore that fine print as it might include hidden fees or even worse.