Sep 26, 2009

Troubled Economy Leads to Increased Credit Repair Fraud

The current market places some unique burdens on the responsible consumer today. Many people who had no prior difficulties in obtaining loans or financing are finding that their credit scores are no longer sufficient to get the type of financing they are used to receiving from lenders. As the troubled economic situation lingers, you may discover that what was once a perfectly acceptable credit score will no longer qualify you for an affordable loan, or you may find that your credit card interest rate has increased, despite your repayment history on that account. Because of these new difficulties in obtaining credit, more and more individuals are turning to credit repair companies for assistance. And just as quickly, scammers and fraudsters are trying to take advantage. The FTC has recently sued several credit repair companies for violating criminal law, and scamming their customers out of thousands of dollars.

While the warning signs of a scam haven’t changed, individuals who may be not be used to the concept of credit repair services may be more vulnerable as fraudulent credit repair companies target the middle class workers who are the hardest hit in the current financial meltdown. These scam artists charge hundreds, even thousands of dollars in advance, while taking little or no action to help consumers who have contacted them for assistance. How can you make sure that you aren’t taken in by credit repair fraud? Dealing with only reputable credit repair agencies is essential, but if you are looking around for a good credit repair company, there are a few things to avoid:

Large upfront fees – these are a clear warning sign. Be especially wary of any company that wants the money up front, before discussing your particular situation.

Company makes broad guarantees – any company that promises a specific credit score is lying to you. There is no way for a company to be certain that you will go from a 620 to a 700, and no way for them to guarantee that the credit bureaus will increase your scores by a certain amount. Again, be especially wary if they make these types of claims regardless of your actual credit score and/or your current financial situation.

Company suggests fraudulent means of credit repair – some companies try to get their clients to create a new, blank credit card file, using an Employer Identification Number (EIN) or other means. These types of credit repair are fraud, and if you follow their advice, not only will you lose money to scam, but you may also be arrested for breaking the law.

Your credit score directly impacts several facets of your life. Don’t trust credit repair to just anyone – do your homework, ask questions, and avoid high-pressure sales tactics. When you do choose a credit repair company, check them out with the Better Business Bureau, and make certain you are getting exactly what you’re paying for.

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Jul 6, 2009

Credit Card Agreements – Understanding the Fine Print

With the passage of the Credit Card Holders’ Bill of Rights, credit card companies will be required to make some changes in their disclosure practices when it comes to credit card agreements. Until these changes go into effect, if you are shopping for a credit card, it’s important to understand the terms and conditions included in the fine print of your credit card. Otherwise, you could find yourself owing hundreds more in unexpected fees and interest, which in turn, may damage your credit scores. Below is a list sampling the most common terminology found in credit card agreements, and what these terms actually mean to you, as a consumer:

  • “Any disputes related to this credit card account are subject to binding arbitration…” Binding arbitration means you are not allowed to file suit in a court of law over any disagreement that you may have with the credit card company. It eliminates the possibility of class action law suits, and any number of legal rights. There is no way around this – if you use the card, you are agreeing to the binding arbitration clause. Be aware that your credit card company will most likely be the one who chooses the arbitrator as well, and your usual options for legal relief will be severely limited should you decide to pursue legal action.
  • One to watch out for if you are taking advantage of a balance transfer to a lower-interest card: “Balance transfer fees are added to the purchase balance and are subject to the APR for purchases…” This basically means that any fees associated to your balance transfer will be treated as if you made a purchase, and will be added to your credit card balance. In addition, you will pay interest on that balance transfer fee. Something to keep in mind if you are close to your limit with the balance that you are transferring – the balance transfer fee may push you over, and cause over limit fees, just as a purchase would.
  • Here’s the phraseology that indicates your credit card is subject to universal default laws: “If the cardholder is reported as delinquent on an account with any other creditor, we may increase the APRs on your account up to the maximum default APR…” Universal default is one of the many terms that will be modified under the new Credit Card Holders’ Bill of Rights, but until that goes into effect, you may be charged a default rate on all credit cards which have this phraseology, even if you’ve only missed a payment with one of those creditors.

The terms and conditions that accompany any new credit card are often lengthy and complex – one of the reasons that many consumers don’t bother to read them. However, this strategy can cost you money and hurt your credit in the long run. Understanding the fine print will help you to make a more informed choice when it comes to your credit, and will help you choose the best credit cards for your overall financial health.

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Jul 1, 2009

Recognizing Credit Repair Scams

As the economic slump continues, more and more people are looking to credit repair in order to improve their credit scores. Creditors are requiring higher scores in order to qualify for loans that in the past could be obtained with mediocre or even marginal credit. Individuals who have lost their jobs and missed payments on credit accounts depend on credit repair in some cases to improve their scores to levels that will allow them to qualify for these increasingly strict credit requirements that lenders have imposed. Scam artists recognize the increased market, so any consumer looking for credit repair help should be prepared to go the extra mile before signing on with any credit repair company. In particular, be wary of any company that falls into one or more of the following categories – chances are good that you may be looking at a scam:

  • Guaranteed Score – any credit repair company that guarantees you a particular credit score is almost always a scam. There is no way to know for certain how high your credit score will be, even if the credit repair is successful. Creditors advertising a 700 or better in 30 days are just out to take advantage of desperate consumers.
  • Minimal Contact Information – be wary of a credit repair company that operates solely from a website. If there is no phone number, and no physical address, it is very difficult to be certain of a company’s legitimacy.
  • Just Opened – don’t trust your credit repair needs to a company that just opened. Scam artists often start fake companies only to fold months later, after taking hundreds of thousands of dollars from unwary consumers.
  • High Pressure Sales – reputable credit repair agencies don’t need to resort to high pressure sales tactics to convince you to hire them. If the company’s experience, history, and level of service aren’t enough to impress you with their ability to help, don’t let a flashy sales presentation convince you otherwise.

Credit repair companies provide a valuable service to consumers looking to get a fresh financial start, but it’s important to be certain you’re working with a professional. Check references, the Better Business Bureau, and even online complaint boards before you make a decision, and be prepared to shop around in order to avoid being taken in by scam artists. By doing the research before you commit, you’ll have a better chance of avoiding scam artists and actually getting the credit repair services you need.

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Jun 16, 2009

Pay for Deletion – Can it Really Help?

One of the many means that people often use to repair their credit is the pay for deletion agreement. With this agreement, your creditor (or a collection agency who currently holds the debt) agrees to have your derogatory collection account removed from your credit report, in exchange for payment on the account. In some cases, you may pay the full amount you owe – in others, you may only pay a percentage, anywhere from 40%-80%.

Pay for deletion is not the same as a settlement agreement. When you pay off a settlement account, the account itself remains on your credit report, and will be listed as either ‘Paid in Full’ or ‘Settled’ depending upon whether or not you paid the full amount to the creditor or a partial payment. Having these settled accounts on your credit report can actually hurt you in some instances, as potential creditors may consider you a risk when it comes to repaying your debts in full. With pay for deletion, the record is removed from your credit report entirely – a potential creditor will not see the account, and it will not be a factor in your credit score.

Pay for deletion is most helpful for charge-off accounts that have been purchased by collection agencies, and other very old debts that have not been paid. By removing these debts from your credit history, you may be able to raise your credit score by several points. If you are using a credit repair agency, and they recommend a pay for deletion strategy, be certain that you have the agreement in writing before you pay – without the written agreement, you may find that the derogatory account remains on your credit report, even after you’ve paid.

It’s important to realize that pay for deletion is only a useful strategy when you have the money available to pay. Creditors will expect money in certified funds, such as a cashier’s check or money order, so having the funds on hand will help to expedite the process, should your creditor agree to the pay for deletion arrangement. Some creditors do not enter into these types of agreements, so it’s not a one-size fits all solution. However, even if the creditor does not agree, you or the credit repair agency may be able to negotiate other favorable terms in order to avoid having a ’settled’ account on your credit report.

While pay for deletion is not always a viable option for everyone, it can help some individuals who have old debts that they can afford to pay off right away. Whether you are repairing your own credit, or relying on the services of a credit repair agency, get the pay for deletion agreement in writing, be ready to pay, and follow up to be sure that the account has been successfully deleted from your credit report after you’ve paid. As long as you pick accounts that are best suited to this type of agreement, you may be able to benefit from a tangible boost to your credit score.

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Mar 29, 2009

Credit Repair During a Recession

With the credit market dwindling, only the people with the very highest credit scores are likely to remain unaffected. For the vast majority of Americans, buying a car, getting a mortgage, or even qualifying for a credit card with a reasonable interest rate has become more and more difficult. Now, more than ever, it is important to realize that errors in your credit report can cause significant financial difficulty down the line. Should you be considering a credit repair service? If you fall into any of the following categories, credit repair may help you attain your financial goals:

You are Looking for a Job:

If you’re in the job market, having a clean credit record will put you a step ahead of other candidates with similar skills and experience. Employers now, more than in recent years, are scrutinizing potential hires more closely in an effort to make certain that any potential employee will be of the best benefit to the company. Leaving your credit report to chance could leave you out of the running for your next position. Having a good credit score will reflect well on how you will handle the responsibilities of a new job, and allows potential employers to feel confident that you can handle your position effectively if hired. Conversely, people who have problem credit may find it more difficult to get a job as employers look to hire only those who seem to be a ’safe’ investment.

You Want to Buy a Home:

The market for subprime mortgages is virtually nonexistent now, but buying a home in the current conditions could be ideal if you have a strong credit score. Low interest rates, coupled with the current drop in housing prices could mean that the home you want is finally affordable. However, if your credit isn’t in the best condition, this favorable market could pass you by. Removing negative information that is too old, incorrect or incomplete could help you to qualify for the home of your dreams sooner than you realized.

You Need to Buy Insurance:

Believe it or not, insurers also look at your credit score, and a better credit history will net you lower premiums than someone who looks like a credit risk. The savings you receive as a result of a good credit score could allow you to afford more coverage at a higher tier. Having adequate insurance is essential in a troubled economy, whether that insurance is for you, your house, or your car. Keeping the premiums affordable is just another added benefit to a clean credit report.

These are just a few of the main reasons you might want to look at getting your credit repaired sooner, rather than later in the current economic climate. Now, more than ever, a good credit score can help you to reap the benefits that can be found while companies are tightening their lending policies. A good credit repair company can help you get rid of errors, or debts that should have been removed due to age. By taking advantage of a reputable credit repair service, you can open the doors to financial opportunity even in a troubled economy.

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