Credit Report Scams

There is never a shortage of unscrupulous tacticians out there, thinking up new ways to pry our personal information from us or to get us to unknowingly sign up for a service with fine print that we barely understand. These scams are constantly evolving, and even though we think we can spot them a mile away, sometimes they reach up and bite us. Here are three to watch out for.

Free Credit Reports

There are abundant free credit report commercials touting companies that require an annual subscription fee to obtain the "free" credit report. While some may be legitimate companies selling a service, the advertising is misleading to many. Any advertised "free credit report" will undoubtedly require the user to register (and pay for) a subscription to a "credit watch" or monitoring program. If you wish to pay for a service like this, then it is not a scam.

However, anyone can obtain three free credit reports annually through annualcreditreport.com. You can get one free report from each of the three major reporting companies each year. You may obtain them all at once or spread them out over a year, effectively creating your own credit monitoring program.

The Job Hunt Credit Check

When job hunting, beware of job offers that require a credit check through a particular "free" credit check company. There are two reasons companies will collect this information. One is to collect personal information for future identity theft, and the other, more commonly, is to get you to sign up with a credit reporting company. By the way, there is no job available.

To foil this scam, tell them you will provide them with a credit score from one of the main credit reporting agencies, which any reputable employer requiring a credit check would accept. Be leery of any "company" that is willing to hire you sight unseen and without an interview. There are several personal, banking and credit information gathering scams related to fake jobs.

Apartment Rental Credit Check Scam

This is a simple scam done through affiliate marketing. The scammer will advertise properties for rent all over the nation through popular free websites. The advertisements will look like any other rental property ad, vague and without an address. As people respond to the ad, the scammer will email them a rental application (fake), a request for a credit report (an affiliate link in the email), and a request to set up a time and day to do a walk-through of the property. The scam is the affiliate link to the "free credit report." After you sign up with the credit report company, you will be told by the prospective landlord/scammer that the property has been rented. You will move on with your house/apartment hunting and be none the wiser until you start getting billed for the "free credit report monitoring" on your credit card. The scammer gets paid for everyone he signs up on the affiliate link.

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Will Purchasing a Car Increase My Credit Score?

Purchasing a car could help you increase your credit score, and this might be an added bonus if you planned on buying one anyway. However, part of the process of building your credit through an auto loan involves a bit of pain to your credit score. Handle the loan responsibly and it becomes an important positive account on your record.

Financing

Paying cash for the vehicle up front, the cheapest and fastest way to buy the car, does not improve credit one bit. National credit bureaus do not track cash payments. You must finance at least some of the vehicle and go through a lender that reports the account to the bureaus.

Initial Dip

Expect an initial dip in your credit score when you finance a car with a loan. Applying for the loan usually comes with a hard inquiry into your credit history, which costs a few points on your score; new debts added to your credit history probably cause an additional drop. If you already have a bad credit history, the initial drop won't be much because you have few points to lose.

Benefits

Your credit score improves the most when you never miss a payment. Just having the loan on your record, however, could be enough for a significant boost. The account does the most good when it still has a balance. Once you pay off the car, loan the FICO scoring model does not count installment loans in the "mix of credit" category.

Tip

Add a few credit cards to your profile if you do not already have any. While paying off a car loan on time should boost your score, installment debt is not as important to credit scoring as revolving debt. After you pay off your car loan, do not request the bureaus remove it, because you want any old, positive accounts on your record.

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Does Paying Off a Loan Increase a Credit Score?

Paying off a loan can help your credit score improve if you don't neglect higher-interest debt in the process.

It will Improve a Credit Score

Paying off debt is almost always a good idea. Paying the full balance on a loan -- whether it be a car loan, personal loan or mortgage -- will not only help you establish a credit history, it can also increase your credit score, according to MyFico.com.

It Can Lower Your Score

Finance author Liz Pulliam Weston warns people not to pay off a loan in full if it means neglecting higher-interest debt, such as credit cards. Credit scores are based on a person's overall payment history and total amount of debt. Paying off higher-interest debt first will increase your credit score more in the long run.

Bottom Line

Take a look at your overall debt when determining whether or not to pay off a loan in full. Target the debt with the highest interest to get best results. If you have little debt to consider, paying a loan in full will certainly give your credit score a boost.

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Does Bad Credit Affect My Chances of Getting Financial Aid?

Bad credit can prevent you from getting a job or a loan, but it probably has no effect on your financial aid package. It can affect your ability to acquire some aid, but the financial aid that depends on a credit check usually is not something you want to use to pay for college. In some cases, your credit history can increase your aid package.

Loans

The most common way that bad credit affects your financial aid package is private student loans. Private lenders probably won't offer you loans if you or your parents have a credit score rating of 620 or below, according to FinAid.org. The only federal loan award that depends on a credit check is the parental PLUS loan. Even then, the loan people only look for derogatory items, such as bankruptcy, collection accounts and judgments, not your numerical rating.

Professional Judgment

If your financial package does not meet your needs and you think you deserve extra aid, ask the financial aid office for a professional judgment. The director of the financial aid office can consider items such as bankruptcy that might appear on your credit history but that do not factor into the Federal Application for Student Aid. For example, if you recently went through bankruptcy -- the worst item on a credit report -- due to unemployment, the director might adjust your income downward.

Bad Credit and PLUS Loans

The financial aid office can increase the student's unsubsidized Stafford loan limit if his parents cannot obtain a PLUS loan. Students and parents often prefer this option because the unsubsidized Stafford loan usually has a lower interest rate. You might qualify for a PLUS even with bad credit if you can prove that your low score is due to extenuating circumstances, such as medical bills.

Tip

When you cannot find any type of financial aid other than private loans and the PLUS loan and have bad credit, you can have someone with a good credit history co-sign your account. Ideally, you should consult a financial aid officer as soon as possible. For example, lenders often allow institutions to approve private loans based on need rather than the student or parent's credit rating.

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How to Get a High Credit Score Fast

The fastest way to get a high credit score is to keep your credit accounts open and take a few simple steps, all of which can be executed now and carried out over the course of the next several months. You'll need a copy of your credit report and credit score to get started, but, contrary to false television and print advertisements paid for by credit repair companies, you don't have to sign up for an outside service.

Instructions

1

Obtain a copy of your credit report and credit score from one of the three credit reporting bureaus, TransUnion, Experian or Equifax. Purchase a credit report and credit score combo online or order by mail. Track increases in your credit score as you complete the restoration process.

2

Request each credit reporting bureaus delete past debt from your credit report. Debt older than seven years and a bankruptcy filing older than ten years is subject to deletion according to consumer credit law. Contact each credit reporting bureau individually and submit a formal request for the removal of each account.

3

File a dispute with each credit reporting bureau if you find erroneous information, fraudulent accounts or an inaccurate payment history on your credit report. Provide any documents necessary to initiate the dispute process. Request a formal investigation of fraudulent activity through each of the credit reporting bureaus.

4

Contact existing creditors and request a lower interest rate, which permits a greater percentage of your payments to clear your debt instead of your interest fees.

5

Transfer high balances onto credit cards with lower interest rates. Inquire about transfer fees before making your transfer.

6

Make a payment above the minimum amount and, when possible, make a payment toward your credit debt more frequently than once a month. The lower your debt to income ratio, the higher your credit score will jump.

7

Don't close any current accounts and stay away from new debts. According to Philly.com, "adding a new car loan to your report can temporarily cut 20 points from your score."

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Removal of Outdated Negative Credit Information

Negative credit information is unavoidable when you run into financial problems. Late payments, repossessions, charge-offs and similar entries pop up on your credit reports and act as a barrier to new credit applications. FICO, the dominant credit score company, states that they reduce your score too. Their effect does not last forever, according to the Federal Trade Commission (FTC), because they only show up for a limited time. You can force the credit bureaus to remove them after the designated time if they don't do so automatically.

Instructions

1

Ask for your credit report from the three credit bureaus through Annual Credit Report.com, the official website designated with providing the reports. TransUnion, Experian and Equifax are independent credit reporting agencies that maintain their own databases. Any or all of the agencies might be reporting outdated negative accounts in your records. The FTC explains that each one must give you a free report annually if you place your order through the federally-approved site.

2

Find the outdated negative items on all three of your credit reports. Open accounts in good standing can show up forever, but the FTC explains that there are limits on the reporting time for most negative data. Credit cards, loans and other accounts must be removed from the records seven years from the time they became delinquent, while bankruptcies should be erased in 10 years.

3

Write individual letters to the credit bureaus asking them to erase the outdated negative information that still shows up on each report. Explain that the reporting period is over and state that you want the entries removed and would like an updated credit report copy. The FTC explains that corrected reports are free, even if you have already received your no-cost annual reports. This gives you the opportunity to make sure the outdated data is gone.

4

Mail your letters through the post office and request a delivery receipt, the FTC recommends. Your removal demand is considered to be a credit report dispute. The bureaus get 30 days to handle it under the Fair Credit Reporting Act, starting when your letter arrives.

5

Read through the credit bureau responses and compare them to your new credit report copies to make sure the outdated negative information is gone. The entries should be completely gone so they are no longer visible to lenders and have no effect on credit score calculations.

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How do I Solve Identity Theft?

If your identity is stolen, the culprit could quickly spend your cash, set up accounts in your name, and seriously affect your credit rating. It is imperative you act swiftly to solve this problem by taking the appropriate action quickly and contacting the correct people who can help.

Instructions

1

File a police report with your local police for identity theft. In addition to reporting a serious crime, it will give you legal rights to clear your credit issues that may occur as a result of the identity theft.

2

Contact any creditors you may have to inform them that your identity has been stolen and there may be a delay with the payment of your bills, Assure them that you are working to resolve the issue immediately.

3

Close any accounts you believe to have been opened or tampered with in the process of the identity theft. This will stop the culprit from running up large debts and potentially destroying your future credit rating.

4

File a fraud alert with Experian. They will then send you copies of your credit reports which you should look over for fraudulent transactions. If you find any, contact Experian to have them removed.

5

Make a complaint to the Federal Trade Commission (FTC). You will be asked to provide important information that can help officials track down identity thieves, and they will take specific information regarding your case in the hope of solving it.

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