When it comes right down to it the Internet is a lot like the old, Wild West with guys in white hats and ones in black hats. The ones in black hats range from the hackers that recently stole millions of U.S. government personnel files to scamsters that make big debt management promises, charge upfront fees, deliver nothing they had promised and then disappear. So today’s free debt management tip is very simple – caveat emptor – or let the buyer beware.
Credit repair scams
One of the biggest scams now going around is companies that promise to do miraculous things to repair your credit – if you’re willing to pay a fee upfront before they actually do anything. They might claim that they can get your credit score increased to something like 720 overnight or remove all the negative items from your credit reports. Worse yet, they might tell you that you need to create a new identity or that you should dispute items in your credit reports even if they’re accurate.
The cold, hard truth is that there is no way to get a poor credit score increased to 720 overnight or even within a few months. It takes time and hard work to improve a credit score because there are only a few things you can do to improve it. Your credit history accounts for 35% of your credit score and that just can’t be changed. History is history regardless of what a credit repair scamster might tell you. There is your credit utilization ratio, which makes up 30% of your credit score, and you could work on it. However, the only real way to improve that ratio is to pay down your debts and you’re probably not going to be able to do that in just a few months let alone overnight.
Can you get negative items removed from your credit reports? Yes, but it’s something only you can do and not a third party. As an example of this, if you have late payments the only way to correct this is by catching them up. If you have defaults in your credit reports you still owe the balances and would need to pay them off. The same is true of accounts that have gone to collection. You would need to pay them off or negotiate settlements with the debt collection agency. And if you’ve missed payments you would have to catch them up. If you’re having a tough time with your debts it’s not likely that you will be able to do any of these things very quickly.
Debt management scams
These are actually not so much scams as they are half-truths. As an example of this there are companies that say they can reduce your debt by negotiating with your lenders for better interest rates, to get your payments waived for several months or even settle your debts. While this is true what they don’t want you to know is that these are things you could do yourself. You don’t need to hire a third party to contact your lenders to discuss your interest rates or to ask that your payments be waived for some period of time. You could pick up the phone and do this yourself and save whatever it is the “debt management” company would charge you. For that matter there is no reason why you couldn’t even settle your debts yourself. It may take some time and patience and you would need to have the cash on hand to pay for your settlements. But if you’re a halfway decent negotiator you should be able to settle any unsecured debts for around 50% of their balances.
Debt settlement scams
Our Federal Trade Commission has cracked down on many of the debt settlement scamsters but it’s clear that there are still some lurking out there waiting to take your money. There are two ways to identify these robbers. The first is if they contact you, as no reputable debt settlement will do this. The second is upfront fees. They are actually prohibited by the FTC but that doesn’t mean there aren’t fraudsters still trying to collect them. Honest debt settlement companies charge nothing until they’ve successfully settled your debts. The best ones even offer 100% satisfaction guarantees meaning that if you are dissatisfied at any time for any reason you can cancel out of your program and not be charged anything.