Credit Consumer Scams

Here are the top five most popular credit fraud consumer scams that everyone needs to beware of and avoid falling victim to these scams.  

Credit repair. Credit-repair companies often 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 most of the claims these credit repair companies make— like removing judgments, liens, and other unfavorable information from your credit records are bogus. Crdit repair firms 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 by going direct to the three major credit bureaus (Equifax, Experian and TransUntion).

Advance-fee loans. These unethical advanced-fee loan lenders appeal to consumers who, based on their credit history, can’t get a loan from regular banks. These scammers falsely promise that for an advance payment, even consumers with bad credit histories can qualify to 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 to the consumer.

Home equity. Deceitful financial home loan 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. The identity theft crime occurs when rip off 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, get turned down for credit loans or discover that their bank accounts have been fraudulently accessed.

File segregation. This illegal scam is 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 and get fined or sentenced to jail time.

If you have a problem with any of the scams described here, contact your local consumer protection agency, state attorney general, or Better Business Bureau. Credit consumer scam victims lose a great deal of time, money and peace of mind. In addition, it can take years to repair damaged credit and your good reputation. Therefore, it is wise always remember that if something sounds too good to be true then it probably is a scam that you need to stay away from.

As always, we encourage consumers to also take a few simple preventative steps to protect yourself as much as possible against identity theft before it happens.

  • Keep an eye on your mail. Know when your account statements come; pay attention to your finances; obtain a copy of your Equifax 3-in-1 Credit Monitoring; and make sure you check for fraud regularly.

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