BBB Scam Alert: Credit repair and debt relief scams

Higher consumer prices and growing economic insecurity have many Americans accumulating  debt and finding it hard to manage.

This can make credit repair and debt relief services look like an attractive option.  But the Better Business Bureau cautions consumers about relying on big promises about better credit and lower monthly payments.

Pamela Hernandez of the Springfield Better Business Bureau (BBB) office says, “Credit repair companies that offer quick fixes are often scams that disappear with consumers’ hard earned money.”

She says debt related services come in many forms:

* Consumer credit counseling firms that offer educational programs to solve educational financial issues. 
* Debt consolidation firms that offer loans to pay off debts all at once;
* Debt relief or settlement companies that renegotiate debts with debtors;
* Credit repair agencies that promise to fix past problems on your credit report such as bankruptcy or late payment. 

The companies that are calling or advertising online frequently promise – and charge for – impossible services.

This includes removing past credit mistakes, such as late payments or a bankruptcy, from your credit report. They offer to provide a new “credit identity” or negotiate with lenders or credit card company to completely eliminate the debt. BBB recommends before providing any financial or personal information to check out the company first.

Hernandez says that scammers often take money to consolidate student loans if borrowers pay an initial fee plus monthly payments.  A woman from Missouri recently lost $1,500 before this way before she reported it to authorities.

She says this is how to spot these types of scams: 

• Advance fees are a concern. Not all businesses promising to help you repair bad credit are scams, but if you are asked to pay in advance, that’s a big red flag. In both the U.S. and Canada, credit repair and debt relief companies can only collect their fee after they perform the services promised.
• Do not believe guarantees. Nobody can guarantee to make debt go away or improve your credit score. In fact, they can’t promise you anything before they have even reviewed your personal financial situation.

• Beware of the big promise. Other red flags are big promises, such as removing negative information from your credit report, or urging you to get a new identity or apply for an Employer Identification Number to use instead of your Social Security number (that’s a crime, by the way). No contract or one that is vague is another warning sign.

For more tips or assistance go to bbb.org.

To report credit scams, go to bbb.org/scamtracker.