The Top Five Consumer Credit Scams

info — Thu, 02 Aug 2007 03:50:22 +0000

Credit repair. Credit-repair companies run advertisements in newspapers, radio, TV, and the Internet, offering consumers assistance, for a price, to clean up their credit histories. The Federal Trade Commission (FTC) warns that many of the claims these companies make—that they can remove judgments, liens, and other unfavorable information from credit records, are false. They cannot legally remove accurate negative information from a credit report and any legitimate help they can offer can be pursued by consumers themselves, at little or no cost.

Advance-fee loans. The lenders appeal to consumers who, based on their credit history, can’t get a loan. The scammers falsely promise that for an advance payment, even consumers with bad credit histories can get a loan. Some of these lenders make money through the 900 numbers that charge consumers who call to find out about the loans. Others simply charge consumers a fee for a loan that is never delivered.

Home equity. Unscrupulous lenders target consumers who have good credit, but have a bad cash flow. They offer credit based not on income or the ability to repay, but on the equity of the home. Exploitative lenders may take advantage of the borrower by abusive practices such as “loan flipping” by repeatedly talking the borrower into refinancing the loan, which adds to the cost of the debt. If you don’t have enough income to make the monthly payments, you will probably lose your home, as many consumers do through these schemes.

Identity theft. This crime occurs when con artists steal credit card numbers, social security numbers, mother’s maiden names, or other personally-identifying information without one’s knowledge, to tap into the good credit histories of consumers. They then set up new credit accounts, charge purchases to existing accounts, or drain bank accounts. Frequently, consumers don’t know that their credit identities have been stolen until they get bills for credit card accounts that they never opened, see charges on their bills that they didn’t know anything about, or discover that their bank accounts have been fraudulently accessed.

Congress passed the Identity Theft and Assumption Deterrence Act of 1998, which makes it a federal crime to knowingly transfer or use another person’s means of identification to commit any unlawful activity.

File segregation. This is a relatively new scam that could get you fined or sentenced to jail time if you use it. It is an illegal scheme used by credit-repair companies to encourage consumers with unfavorable credit histories to obtain new taxpayer identification or employer identification numbers from the Internal Revenue Service under false pretenses and use them to hide their true credit identities from creditors. For a fee, the companies promise advice on how to go about segregating their credit files. File segregation is illegal and consumers who employ it are committing a felony.

Don’t Get Caught in The Free Credit Card Trap

info — Mon, 05 Feb 2007 19:30:43 +0000

They arrive in your mail – a conspicuous looking mail piece from some “official looking” bank claiming that you have been Pre-Approved for a Mastercard or VISA credit card. It makes feel important and that you’ve magically won the lottery.

You’ve been “pre-apprvoed” and don’t even have to have any credit and can even have bad credit or have just filed bankruptcy or even be rated as a “slow payer.” Your personal financial problem don’t matter because, out of the goodness of their greedy little corporate hearts, these companies want to give you a second chance at establishing your credit!

How it all works is like this: you must send in $35 to receive an application that provides you with a name and address listing of banks willing to give you a VISA and/or Mastercard without any credit approval. That’s a stiff price to pay for a sheet of paper, don’t you think? The instructions that come with the application will then let you know how this process works. It seems pretty simple: you must open up a bank account with the bank once that bank approves you for your credit card. That doesn’t seem to be too threatening! These bank and credit card companies make you feel that you’ve won some contest or something and people will feel “good inside” that someone has approved you.

But wait! There’s more! The minimum amount you must deposit is $200, but you can deposit as much as you want. In return, you get a Mastercard or VISA credit card with a credit limit up to the amount you deposit. Wow! What a great honor! This is no break! Think about it. If a stranger gave you $200 to hold for him until Friday wouldn’t you feel safe in granting them a $200 loan? I mean it’s their own money you’ve got. If they default, you’ve got the full amount to pay off the loan. It takes a twisted mind to take $200 from you, grant you $200 credit with your own money plus charge you astronomical interest rates just to take the money from your hand and give it back to you. That’s insane!

Of course, to combat this insanity, the great and wonderful banks claim to help fix your credit report. They say that if you maintain payments in a correct fashion, this information will be reported to the credit bureau. Yea, right! When Shell calls the credit bureau to check your credit for a gas credit card, your report shows 47 defaulted loans and a bankruptcy. However, there is one company that you make payments to on-time. Big deal. Don’t you think the rest of your bad credit will still be the deciding factor in Shell’s final decision. You bet you bottom dollar!

Look at this: the bank makes money from the interest of your deposit. The bank also makes money by charging you 18% to 22% interest for the right to use their Mastercard or VISA. Plus the bank is guaranteed their money because if you don’t pay on time, they take the money out of the bank account you opened with them along with any interest you have accumulated.

Why would anyone with $200 to deposit want a credit card with a $200 limit? If you have $200 and want to buy an item for $200 _ go out and purchase it. That way, you’ll own it lock, stock and barrel. No interest, no payments, no hassle! Plus, you won’t owe your soul to the company store _ sort-of-speak.

Credit is a wonderful thing if you use it intelligently. I know people who charge $100 at the beginning of the month and use that $100 to make $300. It’s free money for 30 days. Then, when the bill comes, they immediately pay the entire balance and come out smelling like a rose with $200 to the good. Credit is also needed in certain circumstances for establishing clout. You can’t call in a telephone order unless you can charge the purchase to your credit card. This delays you getting items you want now.

In fact some companies will try and make you feel “low class” if you don’t own a credit card. I am proud to say that I DON’T OWN one. When I’m in a store and they say “Would you like to put this on your charge?” I promptly say, “No, I pay for everything I buy!” They immediately shut up. And if they would snap back with a rude answer, I’d leave the stuff sitting on the counter, walk out of the store and get what I needed somewhere else. You don’t have to take abuse just because you don’t choose to line the pockets of the rich credit card companies! It’s insane!

If you’ve ever had a credit card and charged $200, you know you end up paying back $400 or more (unless you pay the balance within 30 days.) Stop allowing these so called banks to rip you off.

YourCreditReport.ca: credit reports, credit cards, fixing your credit and personal bankruptcy in Canada » Credit Scams

The Top Five Consumer Credit Scams

Don’t Get Caught in The Free Credit Card Trap