If you are concerned about your ability to qualify for a loan, or if you’re working on your credit, you may be tempted by offers that, for a price, guarantee help. But be wary: You may be at risk for fraud. While you can take steps to help better protect your identity, such as monitoring your credit and checking your bank statements, it’s also important to be on the lookout for credit-related scams.
Such scams are only becoming more common: In January 2015, the National Consumers League published its top 10 fraud scams in 2014. Three of the top 10 scams listed were directly or indirectly related to credit scores.
“There are always creative new scams designed to separate consumers from their money, but there are common characteristics among them,” says Bruce McClary, vice president of public relations at the National Foundation for Credit Counseling (NFCC).
These scams all revolve around fraudsters’ attempts to get your personal information or cash before rendering a so-called service related to your credit, McClary says. Here’s what you should know about four common credit scams:
1. Advance-fee loan scams
In advance-fee loan scams, fraudsters attempt to lure consumers into paying a fee before they are furnished with the full loan amount. When the consumer pays the fee, the scammer makes off with the money without ever providing the loan. Fraudsters often target individuals who have less-than-perfect credit and therefore may have difficulty qualifying for a typical loan.
For example, a scammer might offer to provide a $10,000 loan approval in exchange for a security deposit of $500, sent over wire transfer.
“To someone who is desperate and believes [he or she has] no other choice, the $500 fee seems reasonable,” McClary explains, adding that, in his experience, advance-fee loan scams are the most prevalent of all the credit score scams.
Legitimate lenders often charge application, appraisal, or credit report fees, but these are clearly disclosed, and the fee is usually taken from the total loan amount after the loan is approved. Legitimate lenders won’t pressure customers to wire money for a loan.
2. Refund and recovery scams
In refund and recovery scams, criminals purchase lists of previously scammed consumers and contact those who have already been victimized by credit-repair scammers, phony prize promotions, or fake charities. They offer to help victims recover their stolen money—for an advance fee—without disclosing any additional costs.
“They may also ask for credit card or bank account information, which gives them the ability to commit credit fraud and deplete a victim’s cash reserves,” McClary says.
If a refund scammer contacts you, do not give out any of your information, and be sure to report the incident to the Federal Trade Commission (FTC).
3. Phishing scams
Fraudsters have been known to impersonate credit reporting agencies (CRAs) by emailing you regarding your credit score and credit report. The email may alert you to an alleged change in your account information or decrease change in your credit score.
Typically, a phishing email provides a link that directs you to a website where you are asked to enter personal information, such as your full name, date of birth, Social Security number (SSN), or credit card information. Phishing scammers may also advertise free credit scores in order to get consumers onto their website.
You should not click on links or download attachments in suspicious emails. Doing so could put you at risk for identity theft.
4. Credit-repair scams
Credit-repair scammers typically target consumers with lower credit scores. They promise a quick and dramatic increase in your credit score, but if you fall for it, you could be unknowingly committing identity theft.
Scam companies like this will provide you with a nine-digit number that looks like an SSN and tell you to apply for credit with that number instead of your SSN. But if you do, you could be using a stolen SSN and may be liable for identity theft.
You should be wary of a company that insists that you pay before it works on your credit or if it tells you not to contact the CRAs. Scammers may also promise you a “new credit identity” or tell you to dispute accurate information in your credit report.
In addition to regularly monitoring your credit, you should avoid giving your personal information to solicitors or strangers. Take the time to research businesses or organizations before making a financial commitment, and remember to report any suspicious businesses or communications that you receive to the FTC.
Diane Moogalian is vice president of operations for Equifax Personal Solutions. Prior to joining Equifax in 2007, Diane held several strategic roles with leading financial services companies. Diane graduated from the University of Richmond with a Bachelor of Science in Business Administration (Marketing and Economics) and earned a Certificate in International Business from Virginia Commonwealth University.
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.