Information On Credit Repair Scams

With many people on the verge of bankruptcy, you need to be careful about credit repair scams.

You see the ads in newspapers, on TV, and on the Internet. You hear them on the radio. You get fliers in the mail. You may even get calls from telemarketers offering credit repair services. They all make the same claims:

"Credit problems? No problem!"

"We can erase your bad credit-100% guaranteed."

"Create a new credit identity-legally."

"We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!"

Do yourself a favor and save some money, too. Don't believe these statements. They're just not true. Only time, a conscientious effort, and a plan for repaying your debt will improve your credit report.

The Warning Signs

If you should decide to respond to an offer to repair your credit, think twice. Don't do business with any company that:

* wants you to pay for credit repair services before any services are provided
* does not tell you your legal rights and what you can do yourself — for free
* recommends that you not contact a consumer reporting company directly
* suggests that you try to invent a "new" credit report by applying for an Employer Identification Number to use instead of your Social Security number
* advises you to dispute all information in your credit report or take any action that seems illegal, such as creating a new credit identity. If you follow illegal advice and commit fraud, you may be subject to prosecution.

You could be charged and prosecuted for mail or wire fraud if you use the mail or telephone to apply for credit and provide false information. It's a federal crime to make false statements on a loan or credit application, to misrepresent your Social Security number, and to obtain an Employer Identification Number from the Internal Revenue Service under false pretenses.

Scam artists are out in full force with all of the subprime mortgages and credit card debt. They like to prey on the weak and needy. Be careful.

What Are Prescreened Offers of Credit and Insurance?

You may call it junk mail or it may be the answer to your financial woes.

Mail Call: Bills, a letter from your Aunt Mary, a circular from a local department store, your monthly bank statement, and an offer for a new credit card that says you’ve been “prescreened” or “prequalified.”

A “prescreened” offer of credit? What’s that?

Many companies that solicit new credit card accounts and insurance policies use prescreening to identify potential customers for the products they offer. Prescreened offers — sometimes called “preapproved” offers — are based on information in your credit report that indicates you meet criteria set by the offeror. Usually, prescreened solicitations come via mail, but you also may get them in a phone call or in an email.

How does prescreening work?

Prescreening works in one of two ways:

- a creditor or insurer establishes criteria, like a minimum credit score, and asks a consumer reporting company for a list of people in the company’s database who meet the criteria; or

- a creditor or insurer provides a list of potential customers to a consumer reporting company and asks the company to identify people on the list who meet certain criteria.

Can prescreening hurt my credit report or credit score?

No. There will be “inquiries” on your credit report showing which companies obtained your information for prescreening, but those inquiries will not have a negative effect on your credit report or credit score.

Can I reduce the number of unsolicited credit and insurance offers I get?

If you decide that you don’t want to receive prescreened offers of credit and insurance, you have two choices: You can opt out of receiving them for five years or opt out of receiving them permanently. Call toll-free 1-888-5-OPTOUT (1-888-567-8688). The telephone number is operated by the major consumer reporting companies. When you call, you’ll be asked to provide certain personal information, including your home telephone number, name, Social Security number, and date of birth. The information you provide is confidential and will be used only to process your request to opt out.

Remember that if you have joint credit relationships, like a mortgage or a car loan with a spouse, partner, or other adult, you may continue to receive some prescreened solicitations until both of you exercise your opt-out right.

Why would someone opt out — or not?

Some people prefer not to receive these kinds of offers in the mail, especially if they are not in the market for a new credit card or insurance policy. They may prefer to opt out to limit access to their credit report information for credit and insurance solicitations, or to reduce some mailbox “clutter.” However, some companies send offers that are not based on prescreening, and your federal opt-out right will not stop those kinds of solicitations.

As you consider opting out, you should know that prescreened offers can provide many benefits, especially if you are in the market for a credit card or insurance. Prescreened offers can help you learn about what’s available, compare costs, and find the best product for your needs. Because you are pre-selected to receive the offer, you can be turned down only under limited circumstances. The terms of prescreened offers also may be more favorable than those that are available to the general public. In fact, some credit card or insurance products may be available only through prescreened offers.

Does opting out hurt my credit score?

Removing your name from prescreened lists has no effect on your ability to apply for or obtain credit or insurance.