6 Common Credit Scams to Watch for When You’re Rebuilding Bad Credit
Credit scams and identity theft caused over $900 million in losses in America last year. The price of being a victim of a credit scam is more than monetary. Valuable time is spent trying to return life to normal. Life is already stressful enough; the last thing you need is someone messing with your credit and financial future. The best way to avoid being another a credit scam victim is to arm yourself with information. See the types of credit scams here.
These are the six most common methods of credit and loan scam to watch for.
1. Credit Repair Scams
There’s an entire industry out there dedicated to fixing bad credit for millions of Americans. The truth is, very few people have credit scores that would even warrant a credit repair service. One-third of Americans have “bad” scores under 601.
I’ve personally had a credit score of 570, and it only took about 3-4 months to build it back up to the 700-range of Good to Fair. Fraudsters prey on the stigma and ignorance surrounding bad scores. They’ll offer you instant transformations into good credit. Let’s see wht the traps are.
While there are legit credit repair services out there, the vast majority are either:
Falsely advertising their results.
They are overcharging you to pay off debts.
They are running away with your money and information.
There is nothing that a credit repair company can offer you besides convenience. You don’t need them to erase old debts or dispute things on your credit report.
2. Insurance Scams
You can get credit insurance directly from your financial institution. This insurance is a failsafe in case something happens, and the borrower can’t pay off their debt. This comes into play whenever there’s a death, loss of employment, or medical emergency.
Scammers will, once again, offer the same service that you can get through official channels. Their pitch is that you can get the same insurance at a cheaper premium. If it sounds too good to be true…
When you sign up for these fraudulent services, you’ll either never use it or find out the hard way that it’s no good. The lender or creditor will look at your proof of insurance and find out it’s a fake. The only way to avoid this scam is to do your research on the insurance company.
Also, verify that their terms include a zero-risk cancellation policy. If they charge you for backing out, then don’t sign up.
3. Low-interest Loan Scam
If you’ve never heard of this next scam, it’s because no legally-registered businesses are doing it. This is purely a fly-by-night scam that targets those desperate for a personal loan. The pitch is that they can help you get a standard low-interest loan for an upfront fee.
The idea that they can get a loan in your name for an interest rate that someone with good credit would get is bogus. Financial institutions rely on credit scores to determine risk. Bad credit = high risk, which means higher interest rates.
You can get a loan if you have bad credit, it’s not the end of the world if you have to. Read this helpful article on getting approved for decent-sized loans with bad credit.
4. Unauthorized Subscriptions
Some scams aren’t complex. They go straight to stealing your money. If you find yourself signing up for trials or recurring subscriptions online a lot, you might run into this one. That is if you are the type to examine your credit card statements carefully.
Some companies try to nickel-and-dime customers by slipping in higher monthly fees with autopayments. Some may even double-charge without any rhyme or reason. Large companies do this type of “accounting error” all the time.
You’re at a higher risk of getting hit with unauthorized payments when you sign up for random online subscriptions. Stay diligent and periodically check your accounts.
5. Phishing/Social Engineering
Email phishing scams are as old as, well, the internet itself. Most of it looks like a classic case of spam-mail, but some aren’t so obvious. Some emails can look and sound exactly like an official source.
The most frequent email scams that people have been victims of are Dropbox Files, Apple password change, and Tax Season fraud. You have to pay attention to the email address. There will always be something missing or off.
Even if you ignore the address and subject lines, the contents of the email will tell you everything. For one, no company is going to link you directly to change all your information. You can even hover your cursor over the link and see that it leads to an unfamiliar website.
Spoofed URLs always include something prefix or extension because they can’t copy the company’s URL letter-for-letter.
6. SSN Identity Theft
The ultimate form of credit scams and digital fraud is gaining access to your SSN. If you wind up losing your account access to Google, Apple, or Dropbox, that’s an easy fix. It might take a while, but you can regain control and freeze any connected billing accounts.
SSN theft is an entirely different ballgame. Scammers can take out cards, loans, and ruin your life if they steal all records of your identity. Unfortunately, though, significant leaks containing SSN and IDs happen often in the corporate world.
The only way to protect yourself from significant damage from identity theft is the check your credit report regularly. It’s free, and if you do detect suspicious activity, you can act before your credit score is ruined. The sooner you can begin the process of reporting a case to the FTC (Federal Trade Commission), the better.
If you suspect someone is operating any one of these credit scams, you should act on it. Don’t let someone else fall for these evil traps. Anyone without the means or resources to recover from losing funds/access to their finances can lose everything.
Checks bouncing, overdraft fees, disconnection fees, etc. all add up quickly. We recommend checking out scam detector services for a more proactive approach to credit card fraud.
Credit Repair Scams: How To Report Them
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