About Credit Counselors

Credit counselors are powerful friends to have when you've gotten yourself into credit problems.  Sometimes they are your only friend.  Many times these trained experts are able to negotiate on your behalf with the creditors you are behind payments with to lower the interest rate or eliminate the interest rate altogether. This is called a debt consolidation plan. You send the credit counselors one payment, and they payoff your creditors a little bit at a time from your payment.  Most creditors will agree to this because it means they'll recover their investment in you instead of writing off a loss, or wasting more money on collection agencies to hound you.  Usually one of the provisions of this relaxing of the interest is that you must close the account.

By the time you have gotten so deep in debt that you need a credit counselor you should be tearing up all your cards anyway, because you have no business using them anymore.  Credit counselors can also work with you to create a budget that will get you out of debt.  Because they are trained experts in their field, they are a wealth of useful credit related information and you should get as many pamphlets as you can from them and tap them for as much advice as possible while you are using their services.

Avoiding Scams

Turning to a business that offers help in solving debt problems may seem like a reasonable solution when your bills become unmanageable. Be cautious. Before you do business with any company, check it out with your local consumer protection agency or the Better Business Bureau in the company's location.

Ads Promising Debt Relief May Be Offering Bankruptcy
Consumer debt is at an all-time high. What's more, a record number of consumers are filing for bankruptcy. What ever your debt dilemma is from, the result of an illness, unemployment, or overspending, it can seem overwhelming. In your effort to get solvent, be on the alert for advertisements that offer seemingly quick fixes. While the ads pitch the promise of debt relief, they rarely say relief may be spelled b-a-n-k-r-u-p-t-c-y. And although bankruptcy is one option to deal with financial problems, it's generally considered the option of last resort. The reason: it has a long-term negative impact on your creditworthiness. A bankruptcy stays on your credit report for 10 years, and can hinder your ability to get credit, a job, insurance, or even a place to live.

Bankruptcy has a long-term negative impact on
your creditworthiness.

The Federal Trade Commission cautions consumers to read between the lines when faced with ads in newspapers, magazines, or even telephone directories that say:

"Consolidate your bills into one monthly payment without borrowing"

"STOP credit harassment, foreclosures, repossessions,
tax levies and garnishments"

"Keep Your Property"

"Wipe out your debts! Consolidate your bills! How? By using the protection and assistance provided by federal law. For once, let the law work for you!"

You'll find out later that such phrases often involve bankruptcy proceedings, which can hurt your credit and cost you attorneys' fees.

Advance-Fee Loan Scams

These scams often target consumers with credit problems or consumers who have difficulty getting credit. In exchange for an up-front fee, these companies guarantee that applicants will get the credit they want—usually a credit card or a personal loan.

The up-front fee may range from $100 to several hundred dollars. Resist the temptation to follow up on advance-fee loan guarantees. They may be illegal. Many legitimate creditors offer extensions of credit, such as credit cards, loans, and mortgages, through telemarketing and require an application fee or appraisal fee in advance. But legitimate creditors never guarantee

in advance that you'll get the loan. Under the federal Telemarketing Sales Rule, a seller or telemarketer who guarantees or represents a high likelihood of your getting a loan or some other extension of credit may not ask for or receive payment until you've received the loan.

Recognizing an Advance-Fee Loan Scam

There are many fraudulent loan brokers and other individuals misrepresenting the availability of credit and credit terms. One of their favorite strategies is the "advance-fee" loan scam. That's where they claim to guarantee that they can get a loan or other type of credit for you—but you must pay a fee before you apply.

Ads for advance-fee loans often appear in the classified ad section of local and national newspapers and magazines. They also may appear in mailings, radio spots, and on local cable stations. Often, these ads feature "900" numbers, which result in charges on your phone bill. In addition, these companies often use delivery systems other than the U.S. Postal Service, such as overnight or courier services, to avoid detection and prosecution by postal authorities.

Don't confuse a legitimate credit offer with an advance-fee loan scam. An offer for credit from a bank, savings and loan, or mortgage broker generally requires your verbal or written acceptance of the loan or credit offer. The offer usually is subject to a check of your credit report after you apply to make sure you meet their credit standards. You are usually not required to pay a fee in order to get the credit.

Be suspicious of anyone who calls you on the phone and says they can guarantee you will get a loan if you pay in advance. Hang up. It's against the law.

‘Credit Doctors’

If you know anyone with credit problems, have them read this article about some of the ‘credit doctors’ and their illegal credit repair tricks.   Bad credit repair services have plenty of credit repair scams to take your money.  One credit repair scam is costly and risks putting you behind bars on felony charges.  Many credit doctors have ads that state "Erase your Bad Credit!", or  "You'll have new credit in no time", or "Start over with a clean slate".  They love to spam you with it.  Ignore any spam you receive related to credit repair, credit doctors, or automobile title loans. Honest professional real credit repair services don't spam.  Many of these spammers just take off with your cash and don't tell you anything. Even if the company is a national credit repair company, be suspicious if they suggest you create a new Social Security # or a new EIN.

 

The new SS# or EIN Scam
What happens is you pay the credit doctors several hundred dollars, and they tell you what to do.  Here's where the felony part comes in.  Part of their credit repair scam is to substitute your Social Security number with a 9 digit federally issued Employer Identification Number (EIN), or a Taxpayer ID# that you are to obtain.  By doing this, you are illegally creating a new persona, which you use to get credit cards and loans.  Trying to fix bad credit with your federal numbers like that is a felony, and if you used the internet or phone lines, you could be charged with racketeering under the RICO act, which law enforcement agencies love to abuse.  Besides, credit bureaus are getting much better at catching these red flags because they are smarter than you and the credit doctors.  But many times the credit doctors lie to you.  As the FTC warns, credit doctors tell you “It’s 100% LEGAL...,” or “It’s not only legal, it’s your right.”