On average, more than 50% of Americans have, at some point, been denied a loan, credit card, or even a job due to bad credit, according to an article published by Forbes Media. As lenders consider you high-risk if you have a low credit history, you may fall for common credit repair scams in the process of trying to fix your financial problems. Although there are genuine credit repair companies in the U.S., it is prudent to be on the lookout for scammers. For instance, some scammers will lure you into committing crimes such as fraud and identity theft to fix your poor credit.
To be on the safe side, here’s what you need to be mindful of to stay clear of credit repair scams.
New Credit Identity
With a poor credit history, some scammers may promise you a “new credit identity.” To hide the record, they may give you a 9-digit number that resembles a social security number, often known as credit privacy number (CPN). Alternatively, they may ask you to apply for an employer identification number (EIN). Although this is a legitimate number, the EIN cannot replace a social security number, and so it’s illegal to use it as one. Even worse, some of these scammers steal social security numbers from children and sell them, says the Federal Trade Commission Consumer Information. With this in mind, you should avoid anyone who proposes to give you a new credit identity at a fee.
Raising a False Alarm for Identity Theft
In some cases, bad credit could be because of fraudulent accounts opened using your identity. In such cases, the Fair Credit Reporting Act (FCRA) requires the lender to erase the fake information from your account within four working days, says the U.S. Department of the Treasury (DOT). As a desperate move, you may fall for scammers that ask you to raise the alarm concerning fake identity theft. Usually, such scammers help you delete legitimate accounts and even file a police report for you to make it look like real identity theft. In the process, you will be committing multiple crimes and may end up in jail.
Faking Authorized User Status
If you have bad credit, you can request your loved ones to add you on their credit card as an authorized user, provided they have a strong credit history. Sometimes, you may not have someone to accept you on their credit card and opt to seek services from brokers who claim to connect you with a credit holder. This method is fraudulent, and you may serve a jail term if the lender notices the same.
What Are Some Warning Signs of Credit Repair Scams?
Since scammers may also package themselves as legitimate credit repair companies, you need to be extra careful to spot them. Some states regulate their credit repair services, making it a bit difficult for fake companies to operate. Because scammers still exist, look out for red flags such as:
• Insisting on upfront payment
• Asking you to dispute accurate information on your credit history
• Asking you to give false information
• Advising you not to contact the credit reporting company
In case you come across a credit repair scam, it is wise to report it to the nearby consumer affairs office for further action. Additionally, consider reporting any credit repair issues to the Federal Trade Commission (FTC) so that they can take action against the fraudsters.
To avoid becoming a victim of credit repair scams, watch out for these warning signs. Additionally, purchase the right personal insurance to survive tough financial times without defaulting on your credit payments. To learn more about personal insurance, at Tompkins Insurance Agencies. We look forward to helping you find the right solution for your needs.