Credit Repair Scams: Firms Solve Their Money Problems by Taking Yours

When your credit stinks you may be tempted by bogus offers to fix your credit problems and help you obtain a major credit card – in one high priced transaction. These companies can take numerous forms – from firms purporting to fix all that ails your credit to companies claiming to help you obtain a major credit card. Here’s how some of them work:

You could be referred to a “900” number with a promise to help you get a major credit card. Instead of a credit card, you might get a stack of credit card applications and a huge charge on your telephone bill for as much as $50 – or more.

Credit repair companies that double as credit card issuers that charge huge fees for what they claim are “starter” credit cards. After shelling out several hundred dollars for credit repair services that you could easily handle yourself – for free – by contacting the major credit bureaus, they’ll hit you for another several hundred dollar joy ride to get a major credit card. Instead of a credit card, though, you’ll frequently wind up with a pre-paid debit card. It works like a credit card, with the exception that you only have access to charging privileges after you make a deposit into a “special use” account. The charges are similar to what you’d pay a credit card company, except when your funds are depleted you have to reload the card with additional funds – for a fee.

Slick telemarketers who promise you a “major” credit card. After paying fees in advance you open your mailbox to discover the major credit card you were promised is instead a shopping charge card with check cashing privileges. You’re only allowed to charge items available through their catalog – and usually after paying a down payment as high as 50% of the value of the item. You then pay exorbitant interest rates for years. And the “check cashing privileges”? A cash advance loan with annual APRs as high as 1500%.

The major take-away value here is that there’s no such thing as a free lunch. If a company calls you on the phone or sends you a letter with the offer of guaranteed credit, be afraid. Be very, very afraid. Hold onto your wallet and head for the hills. If you’re not careful, you could get taken for a very expensive ride that will teach you an important lesson about human nature: It’s been said there’s a sucker born every day. If you’re not careful, today could be your “first” day of life - for learning the cruel truth about some of the lengths that some of the seedier companies in the world will go to in order to rip you off.

Be careful out there!

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