Advance Fee Credit Cards

Some companies promise to get you a credit card no matter how bad your credit is.
Hereís what can happen if you pay them the $200 or more they usually ask for:

You receive a credit card thatís only good for over-priced merchandise from their catalog.

You get applications for secured credit cards. A secured credit card offer requires you to deposit $500 in a bank account to receive a credit card with a $500 limit.

You receive nothing at all.

Secured credit cards from a legitimate bank or credit union can help you re-establish credit. Many banks and credit unions will give you a secured credit card with no upfront fees or charges. If you want one of these, go to your own bank or credit union and apply for one.

Other scams involve credit cards with a low credit limit of $300 or so. The bank making the offer charges you an application fee, a processing fee, annual fees, a rush approval fee, and a high interest rate that starts the day you open the account. These charges may eat up as much as 90% of your credit line! Remember, if you want a secured credit card, go to your own bank or credit union and donít pay excessive fees.

Instant Loan ChecksÖ.. There is no “free” money

Instant loan checks often come to you in the mail. They look like a bank check but are really a loan. The letter that comes with the check tells you that all you have to do is sign the check and cash it. When you sign the back of one of these checks and cash it, you are actually signing for a loan and agreeing to make payments on the loan with interest. To find the interest rate, monthly payments and other costs, you must carefully read the letter and the other papers sent to you with the check.

Consumers often mistake these checks for benefits or reimbursements. After they cash the check, they find themselves with a high-interest loan they didn’t want, didn’t need, and couldn’t afford. The rate of interest charged by the lender is often higher than what is stated in the cover letter. If you canít make the payments, the lender may ask you to take out a new loan and secure it with your home.

Before signing and cashing a check, be sure you know the following:

Who sent the check and why?

Read the letter that comes with the check. Be sure you understand what youíre committing to by signing and cashing the check.

If you donít understand the terms, call the sender and ask questions.

Destroy checks that you don’t intend to use it so no one else can cash them.

Credit Repair Companies

Credit repair companies promise to improve your credit. They may also promise to get you a loan or a credit card. They lead you to believe they have special ways to get negative information off your credit report. They donít.

Credit repair companies have no special powers to improve your credit. There is nothing they can do for you that you cannot do yourself. Paying them leaves you less money to pay your current bills and past debts.

Because of the problems with credit repair companies, strict laws were passed to regulate their activities. For example, they must provide a written contract that you can cancel within five days. They canít require payment in advance, and all promised services must be completed in 90 days. They must also register with the Department of Justice and file a $100,000 bond with the Secretary of State. Be aware that very few credit repair companies follow the law.

2.  Safeguard your checks and checking account numbers.   Never give your checking account number to anyone except in a bonafide financial transaction such as a loan application.  Never give your checking account number to someone who is soliciting you, particularly over the phone.

3.  Do not pay up-front fees in hopes of obtaining a loan or a credit card.  An exception to the rule is a mortgage loan application which usually requires payment for an appraisal and a credit report.  Compare rates, fees and service before committing to a particular mortgage company.  Popular loan scams ask you to send a fee promising a loan or credit card even if your credit is bad.  Be especially cautious if they ask you to wire money, or send it to an out-of-state address.  Some advanced-fee schemes actually provide a service, such as sending you a list of banks offering secured credit cards, but that service is usually of little or no worth.

4.  Be cautious of credit repair services which claim to be able to fix bad credit.  If you have inaccurate information on your credit report, you may contact the credit bureaus directly and dispute it yourself.  If you have had recent credit problems, anything a credit repair service does to remove the related information from your record is very likely illegal and only temporary.  You may obtain a copy of your own credit report by contacting the credit bureau.

5.  Never sign blank or incomplete documents, or any documents you don’t understand.   Take time to read and understand documents you are asked to sign.  Don’t rely on what someone tells you.

Having a credit card is a big responsibility and you need to fulfill your financial obligations and safeguard your good name.  Check your credit report for inaccuracies and make sure that you pay your bills on time.  You donít want your credit score to drop because of reporting mistakes.

Your credit score is so important and determines the amount of interest you pay on your credit card, mortgage and the cost of your insurance rates.  Keep a close watch on your credit report and resolve mistakes as soon as you spot them.