Credit Alert

This section of our Credit Management Series alerts consumers on deceptive credit counseling practices and give tips on choosing a reputable credit counseling agency.

Credit Alert On Debt Management Programs

Debt Management Programs were setup to help people who are behind in their credit card debts, medical bills and other unsecured debt, get back on track with their bills. While many people have been greatly helped by reputable credit counseling agencies, there are people who have been hurt by unscrupulous debt management companies.

Here are some tips for spotting deceptive debt management programs:

Spam Tactics – Always be suspicious of any credit counseling agency that contacts you first. Telemarketing and bulk e-mails are spam tactics. A reputable credit counseling agency should only contact you after you’ve called, emailed or asked for help.

Keeps the First Payment – Some credit counseling agencies keep your first payment, rather than paying your creditors. While this debt management practice is not illegal (as long as they tell you), it does represent an excessive fee. In addition, this practice will further hurt your credit by making you a full 30-days further behind on your payments, and is proof that the counseling agency’s priorities are their own interests and not yours.

Expensive Membership/Monthly Fees – Most credit counseling agencies charge membership/monthly fees to cover costs associated with handling your creditors. Be suspicious of any credit counseling agency charging more than $75 for membership or $50 for monthly fees.

Pressure Sales Pitch – Credit counseling is a service to help you. Your credit counselor should listen to your financial problems and help you decide the solution best for you. A credit counselor should not be a high pressure salesperson. Be certain the service they are offering is what you need.

If you have any more questions on debt management programs, please visit our debt management section, contact us online or call National Debt Crisis Center, Inc. at 1-800-334-6797.

Credit Alert On Debt Consolidation Loans

A debt consolidation loan is a loan to repay several other loans or debts. Many homeowners use home equity to secure debt consolidation loans. This debt solution can be useful for consumers struggling with high interest, unsecured debts. However, beware of credit scams that misrepresent themselves as debt consolidation loans.

Advance-fee loans are debt consolidation scams that lure consumers with bad credit by promising a “guaranteed” loan. These loans can be advertised in a variety of ways, and when the consumer calls, the scammer gathers personal information such as of driver’s licenses, employment records, Social Security numbers, bank account information and credit card numbers to complete the “application”. A few days later, the “lender” will call and advise the consumer that they are accepted; however, before they can continue processing the loan, the consumer must do one of the following:

• Purchase Lending Insurance
• Pay for Processing Fee
• Advance Payment of Loan (3 months of payments)

The consumer is asked to pay immediately before the debt consolidation loan can be released. So the consumer will electronically transfer money to this “loan” broker and never receive the funds promised.

National Debt Crisis Center warns consumers against using a loan service that pressures you to act immediately, will not disclose their physical location and/or uses lenders of questionable background. A legitimate lender will never “guarantee” a debt consolidation loan or ask for payment for processing your loan application.

If you are considering applying for a debt consolidation loan, please contact us online or call National Debt Crisis Center, Inc. at 1-800-334-6797. Get all the facts so you can protect yourself against a debt consolidation scam.

Credit Alert On Credit Repair

Credit repair can be accomplished by yourself or through a credit repair company. Credit repair companies can assist consumers with contacting credit reporting agencies to remove inaccurate, obsolete, and erroneous items from their credit reports. Unfortunately, there are some unscrupulous credit repair companies that falsely claim they can “erase” bad credit and help consumers start with a “clean slate” through file segregation.

File segregation is a credit repair scam that is ineffective and illegal. After paying a large up-front fee, the consumer will be directed by the credit repair company to apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS) and use that number to apply for credit. The scammers will then direct the consumer to have this new number associated with another address. Because EIN closely resembles a Social Security Number (SSN), the consumer may be able to trick lenders into providing credit because the credit history attached to the EIN is clean.

It is a federal crime to make false statements on a credit or loan application. File segregation is illegal. No matter what a credit repair company claims, credit repair can not remove negative items that legally belong on your credit report. If you become involved with a credit repair company that is using questionable tactics, report them to your local consumer affairs office or your state attorney general.