It’s almost impossible to open your email or surf online without stumbling across ads to “repair your credit” or “get rid of your debt TODAY.”
The recent news about the New York City-based debt settlement scam company, Mission Settlement Agency, which Federal agents found to be defrauding customers of millions of dollars, serves as a stark reminder of the kinds of scams consumers encounter when seeking financial help.
Unfortunately, as more consumers find themselves rejected for credit cards, loans, and mortgages, the temptation to pay for services to “fix” the problem on their credit report can certainly be enticing. However, companies that pledge instant elimination of your debt, or promise remarkable improvements to your credit score are not going to be able to deliver these results.
While there are steps that consumers can take to repair bad credit, all of these steps require little to no money, just time. There’s usually no reason to pay someone to do these things for you, and no one can or should promise to improve your credit.
The majority of these company offers cost significant money, and they often are unable to deliver on their grand promises. So to help you avoid falling victim to a scam, the following are five red flags to look for when seeking debt help:
- Be wary of fraudulent and illegal practices. Some companies will send multiple credit disputes of negative (but accurate) records to the credit reporting agencies, claiming that information is incorrect, under the law that information must be verified as accurate within 30 days or should be removed from your record. Another fraudulent method is to recommend that you open a new social security number or employer identification number. This is also illegal and fraudulent, and does not work.
- Don't pay a large sum upfront. Beware companies that require money up front and recommend that you do not contact credit agencies yourself, among other things. Keep in mind that any legal, ethical method to repairing credit can be done by you, without any fee. This includes sending a 100-word statement to the credit agencies, explaining your delinquencies, disputing any inaccurate information, and continuing to pay bills on time.
- Don't believe absolutes. Companies that are willing to make guarantees are unually scams. If a company isn't aware of your specific situation, but claim to have the ability to eliminate your debt in one year "guaranteed", then it's time to start asking questions.
- Read the fine print. Review the agreement closely to ensure it outlines the timeframe for payoff, and the exact amount the company is going to charge in terms of fees.
- Research, research, research. The best way to avoid a scam is to educate yourself. If a company has only been around for a year or two, that doesn't mean it's necessarily a scam, but it should raise a red flag. Also, any legitimate debt consolidation or credit counseling company should be accredited by the appropriate nonprofit agencies. For example, MMI is accredited by the Association of Independent Consumer Credit Counseling Agencies (AICCA), and is also a member of the National Foundation for Credit Counseling (NFCC). In addition, MMI has roots that go back 55 years.
For more information about debt settlement scams and ways to avoid falling victim to fraudulent practices, visit FTC.gov.