If you’re seeking debt relief help, here’s some important information you need to know about this particular industry. In this article, I’m going to point out some of the debt relief scams that are taking place in the credit repair, debt settlement, and debt consolidation areas. After reading this article, you’ll know what to do to ensure that you don’t get ripped off.
The first thing you should know about the debt relief industry is that it is about as slimy as it gets. Yes, there are some reputable companies that are genuinely interested in helping you. But there are also a ton of crooks, hooligans, snake oil salesmen, and scam artists. I’m going to do the best I can to give you some tips on what should raise your scammer alert antenna, and ways to at least pre-qualify any company you’re thinking of doing business with.
Credit Repair Scams and Cons
The role and mission of credit repair companies is to help you to clean up your credit reports. Their sales pitch is that their methods can result in getting negative items removed or corrected in your credit reports or files on hand at the three major credit bureaus — Experian, Equifax, and TransUnion.
The credit repair companies charge for their services in one of two ways:
– Subscription – This is the most common billing method. The way it works is that the credit repair company will charge you $49, $79 or whatever per month. For that payment, they promise to clean up all negative items on your credit reports across the 3 credit bureaus. From comments that I’ve read, the average amount of time that it takes to clear multiple items is about 6 months.
– Pay Per Deletion – This is a growing credit repair billing approach. Under this method, the credit repair company says that you don’t have to pay them until they provide proof that the negative item has been removed. It sounds like a good deal, right?
Well, there’s a catch. You see, you’ll be charged for each individual item that is removed from each credit report. So let’s say that their rate to remove one item from one credit report is $30. Well, that same negative item needs to also be removed from the other two credit reports, right? That’s another $60. So your total out-of-pocket cost would be $90 for one item.
What to Watch Out For:
– Disreputable credit repair companies that ask for money or your credit card details before they’re even willing to speak with you.
Debt Settlement Scams and Cons
The role of debt settlement companies is to negotiate with your creditors to reduce your outstanding debt amount. Your role would be to pay money into an account that the debt settlement company or their representative can then use to pay your creditors.
What to Watch Out For:
– Disreputable debt settlement companies will request that you make a good faith deposit into an account while they continue to negotiate with your creditors. The company will then proceed to siphon money from your account under the guise of fees for services rendered.
Debt Consolidation Scams and Cons
Debt consolidation companies will negotiate with your creditors to create a repayment plan that involves getting them to reduce the interests rates they’ve been charging you on credit cards and loans. They’ll also try to get you more time to pay off the amounts owed.
So when you pursue a debt consolidation solution, it means that you’re going to take out a loan to pay off your debts.
What to Watch Out For:
– Disreputable debt consolidation companies will ask you to pay a fee upfront before they will get off their butts. And a lot of them will then disappear or not return your phone calls once they have your money.
Ways to Defend Yourself Against All Debt Relief Scams
– Look for companies that make it easy to call and speak with a real person to get all of your questions answered. Never pay money upfront before having this opportunity.
– Visit the website www.ripoffreport.com, which is a great source for uncovering debt relief scams. Perform a search to determine if there have been any complaints lodged against the company. One or two complaints might not be that big of deal, depending on what’s in the complaint. But lots of complaints are a bright red flag.
– See what the Better Business Bureau website (BBB.org) has to say. Many debt relief companies will have BBB ratings. Of course, I like to see A-ratings. But anything below a B-rating would be another red flag. By the way, you can also perform a search in the search engines for a company’s BBB rating. Just enter “company name bbb”. For example, “Big Bob Debt Helper bbb” (without the quotes).
– Perform general searches in the search engines for complaints and reviews. For example, “Big Bob Debt Helper complaints” and “Big Bob Debt Helper reviews”.
You’re probably going to find a negative ding or two on even the best companies. But if you perform the research for complaints, reviews, bbb ratings, etc., you should gain a good feel and overview of the company. That should be enough for you to determine if you want to contact them to ask more questions, and avoid becoming a victim of sneaky debt relief scams.