In recent years, our televisions and email inboxes have been inundated with advertisements from companies promising to help consumers improve their credit. Many of these companies offer a quick fix for people who have a high rate of debt or bad credit, and the promises made often seem too good to be true. Many offer extended lines of credit, immediate debt relief, and easy access to cash. Unfortunately, the fact of the matter is that many of these offers are too good to be true, and consumers must read carefully to be aware of possible credit scams and protect themselves from compounding their money troubles.

The Federal Trade Commission (FTC) cautions consumers against many forms of credit scams that consumers face today. Two of the most prevalent scams against consumers include offers for advance-fee loans and credit repair services.

Advance-fee loan scams often target consumers with credit problems or consumers who have difficulty getting credit. In exchange for an up-front fee, these companies guarantee that applicants get the credit they want – usually a credit card or personal loan. Below are some points to keep in mind before responding to ads that promise easy credit regardless of credit history:

Most legitimate lenders will not “guarantee” a loan or credit card before a formal application process is followed, especially if the applicant has bad credit or a bankruptcy. It is an accepted and common practice for reputable lenders to require payment for a credit report or appraisal. A processing or application fee is also an accepted practice. Never give a credit card account number, bank account information, or Social Security number out over the telephone unless the company is familiar and it is explained clearly why the information is necessary.

Credit repair scams are some of the most common credit scams today. They are in ads in newspapers, on television, and on the Internet. Consumers receive fliers in the mail and calls from telemarketers offering easy and immediate credit repair services. Consumers should be very cautious in answering advertisements for these services. The FTC advises consumers to be aware of any credit repair companies that:

• ask for payment for credit repair services before any services are provided
• do not advise a consumer of his or her legal rights and what can be done independently by a consumer – for free – to improve credit
• recommend against contacting a credit bureau directly
• suggest inventing a “new” credit report by applying for an Employer Identification Number to use instead of a Social Security number; or
• advise disputing all information on a credit report or taking any action that seems illegal, such as creating a new credit identity. If a consumer follows illegal advice and commits fraud, he or she may be subject to prosecution.

Consumers who feel they may have been a victim of a credit scam such as the two described above should contact their local consumer protection agency, state Attorney General, or Better Business Bureau. For additional information on credit-related scams, or to file a formal complaint against a fraudulent company, visit the Federal Trade Commission’s web site.