Consumer Comeback Blog

Avoid These 6 Top Scams that Damage Your Credit Score

Written by Jeffrey Trull

damage-credit-scamsWhen you think of scams, stolen cash or unauthorized charges on your credit card might come to mind first. While these losses can have an immediate impact, there’s the potential for credit score damage, too, with even more costly long-term effects.

Whether it’s credit scams or other tricks that hurt your score, watch your wallet and your credit in these six cases.

1. Credit card debt scams

Companies offering debt settlement programs may be a scam if they promise big results and charge fees upfront before they start. They may guarantee to settle your debt for “pennies on the dollar,” a potential red flag of a scam.

Other companies that offer to help you reduce credit card interest rates may really be looking to steal your credit card information to commit fraud. If you turn over account numbers and other personal information on the phone or by mail, they may turn around and use your card to make unauthorized purchases.

Avoid paying upfront fees or signing up for services that guarantee results that sound too good to be true.

If you’re looking to reduce credit card interest rates, call customer service and ask for lower rates yourself.

For more, see the FTC’s warnings on debt settlement scams and interest rate reduction scams.

2. Bogus accounts and charges

There are many ways identity theft can hurt your credit. Identity theft that results in credit card fraud can lead to fraudulent charges and bogus accounts you didn’t sign up for. When thieves open up credit cards or other accounts in your name with your Social Security number, your score can suffer.

Don’t fall for the tricks. Identity thieves take your information from a variety of methods, like card skimmers, phishing scams, and stolen documents. Stay up to date on how to protect yourself. Be careful with emails that look like they’re from a trusted business, especially when they’re asking for account information. Shred your documents, as many thieves go through trash to steal information.

3. Tax refund scams

Scammers may send notices, emails, or make calls pretending to be the IRS. This communication can be a phishing scam designed to get you to hand over personal information.

Once scammers have your Social Security number or other personal information, they can turn around and use it to file a false tax return to claim your refund.

The IRS never contacts taxpayers by email, social media, or text message, so don’t give personal information to anyone requesting it through these channels. Instead, call the IRS on your own or check their page on phishing scams for more information.

4. Fake mortgage help

Mortgage scams can hit hard, especially since many target homeowners are already struggling to make their payments.

Common mortgage scams include offers to help get out of foreclosure and save your home in exchange for paying for services.

Homeowners can fall behind on payments and end up in default when they find the “business” they hired took their money and didn’t provide any real help. Homeowners who are delinquent or in foreclosure will likely suffer serious credit score damage as well as be at risk for losing their home.

The FTC says to watch for these warning signs from agencies that offer foreclosure help:

  • Tells you to stop paying your mortgage and pay them instead
  • Tells you not to contact your lender, a lawyer, or a housing counselor
  • Asks for upfront fee before providing any services
  • Tells you to transfer your property deed or title to them
  • Pressures you to sign papers

For more on your mortgage and foreclosure, see our posts on steps for avoiding foreclosure and when refinancing makes sense.

5. Credit repair scams

Credit repair is supposed to be about improving your score. But credit repair scams can cost you money while hurting your credit score.

Credit repair agencies might guarantee to repair your credit if you’ve had problems in the past, which is possible sign of a scam, according to the FTC. They might require an upfront fee or use ineffective or even illegal tactics, like telling you to dispute accurate information on your credit report. Credit repair involving creating a “new credit identity” by using an Employer Identification Number (EIN) is against the law.

Don’t fall for the hype. Much of what credit repair agencies offer won’t help your credit or isn’t worth paying for. Stick to do-it-yourself methods that don’t cost anything or work with a reputable credit counseling agency to deal with credit and debt problems. For more, see our guide to credit score repair.

6. Auto financing ripoffs

According to a Gallup poll, car salesmen are the least-trusted professionals in America. In some cases, they’re known for offering bad financing deals by claiming you don’t qualify for the best rates.

They may also offer a loan with a longer term, a common trick to bring down monthly payments and convince buyers they can afford a more expensive car.

Don’t fall for loans that cost more in interest and prolong the length of time you’ll be in debt from your auto loan. Shop around for the best deals on financing, including banks and credit unions where you can get pre-approved.

For more, see our post on how to avoid getting ripped off on your auto loan.

Fixing a credit mess

If you’ve been a victim of credit scams, you’ll likely need to do some work yourself to erase the damage. Don’t forget: Any inaccurate information appearing on your credit report, which determines your credit score, can be removed. Follow our guide for disputing credit report errors.

(image: ajimixx)

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