Be Wary of Credit Repair & Debt Settlement Promises
To consumers struggling to make ends meet, advertisements for credit repair or debt settlement may sound like the perfect solution to their financial woes. But in some cases, these services do little or nothing for consumers’ debt problems and instead sap their finances and leave them in need of bankruptcy protection.
Before you sign up for any service that promises to improve your credit, make sure you understand the potential risks involved in such offers.
Credit repair offers (which are often scams) generally advertise their ability to “wipe out negative information” on a credit report or provide a “quick and legal” way to improve your credit. But the truth is this:
- You can remove negative information yourself…if it’s false: You don’t need to hire an outside company to remove mistakes from your credit report. Rather, visit annualcreditreport.com and request a free copy of your report. If you see any information that doesn’t belong, simply follow the site’s instructions for contesting the information and the responsible parties will take steps to remove it.
- Only time can erase true negative information: On the other hand, if your credit report contains damaging information that is correct (e.g. that you’ve missed payments, defaulted on a loan, or something similar), only time (and positive credit behavior) will ease the information’s impact.
- A blank credit report isn’t good news: Even if a credit repair company managed to erase all negative information from your credit report, having a blank credit report might be a disadvantage for you. Why? Because without any credit history at all, potential lenders are unable to make an assessment about whether or not to lend you money.
Another commonly advertised financial service is debt settlement. While some debt settlers are legitimate and can be helpful to those in financial need, others are less scrupulous and simply take customers’ money without helping them much in exchange. Here’s the truth:
- You can settle your own debts: If you’re struggling to keep up with or have fallen behind on some bills, your creditors may be willing to negotiate with you. Why? Because in many cases, creditors stand to make more money from settling a debt (say, for an amount less than the total owed or for a lowered interest rate) than from a customer’s bankruptcy filing.
- You shouldn’t have to pay upfront fees: Recently passed rules from the FTC mandate that debt settlement firms cannot charge upfront fees for their services in most cases. Some debt settlers, it seems, were taking payments from customers but putting little or nothing toward actual creditor payments.
- You have a legal obligation to pay your debts: Part of the agreement you have with any lender is that you will pay the bill for any debt you incur – that’s why you have to sign a contract before anyone will loan you money. If a debt settlement company suggests that you will face no legal repercussions from withholding payment from your creditors, be suspicious: in many cases, that’s simply not true.
Similar Posts:
- What to Expect from Credit Repair Help
- Top Three Fix Credit Services
- For Consumers Scammed by Debt Settlement Companies, Chicago Bankruptcy Offers Realistic Alternative
- Debt Consultants and Debt Management Plans: Scams, or a Good Alternative to Bankruptcy in Canada?
- Do Bad Credit Debt Consolidation Loans Exist Anymore
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