Credit Fraud

Credit fraud can occur in many forms, such as stolen credit identities, advance fee loan scams, and credit repair deceptions, and can jeopardize your financial standing. Credit fraud can raise interest rates, increase financial service fees, and put homes at risk. It is an unfortunate fact that credit fraud can be difficult to detect, and time consuming to repair. However, by informing yourself about credit scams and abuses, you will know what to look for and how to respond.

Credit Repair
There are companies that appeal to customers by promising to remove negative, but accurate information from a credit report in exchange for a fee. They claim that after they have cleaned up your credit report, you will be able to get a home mortgage, car loan, or even a job. In fact, it cannot be done.

The only way that accurate and timely information, such as bankruptcy and collection accounts can be removed from a credit report is through time, conscientious effort, and a personal debt repayment plan. It is not legal for anyone to immediately remove this information. Once these credit repair companies receive your money, often hundreds of dollars, they will be unable to improve your credit rating, and many often vanish with the funds.

Beware of companies that:

• Ask for payment prior to servicing you. (Under the Credit Repair Organizations Act, these companies cannot require you to pay until after they have completed the promised service.)
• Do not let you know about your rights, and what you are able to do yourself for free.
• Recommend that you not directly contact a credit bureau.
• Suggest that you try to invent a "new" credit report by applying for an Employer Identification Number, instead of using your Social Security number.
• Advise you to dispute all of the information in your credit report or take any questionable actions. By following illegal advise and committing fraud, you may be subject to prosecution.

It is completely feasible for you to repair your own credit report.

• Contact your creditors as soon as you realize that you are unable to make your payments.
• Contact your local credit counseling service, if you need help working out a payment plan and budget.
• You can also check with your employer, credit union, or housing authority for no- or low-cost credit counseling programs.

In addition, you are entitled to specific rights under the Fair Credit Reporting Act.

• You are entitled to a free copy of your credit report, if you have been denied credit, insurance, or employment, and ask for the report within 60 days of notice, or if you fit into one of the following classifications.
• You are unemployed and plan to look for a job within 60 days.
• You are on welfare.
• Your report is inaccurate due to fraud.
• If your application for credit, insurance, or employment is denied because of information supplied by a credit bureau, the company you applied to must provide you with that credit bureau's name, address, and telephone number.
• You can dispute mistakes or outdated items for free. The credit bureau can provide you with a dispute form, or you can submit your dispute in writing, along with any supporting documentation. You should only send copies, not original documents.

Remember:

• Accurate negative information can generally be reported for seven years; however, there are exceptions.
• Bankruptcy information can be reported for 10 years.
• Information reported because of an application for a job with a salary of more than $75,000 has no time limit.
• Information reported because of an application for more than $150,000 worth of credit or life insurance has no time limitation.
• Information concerning a lawsuit or judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer. ·

Default information about U.S. Government insured or guaranteed student loans can be reported for seven years after certain guarantor actions.

Advance Fee Loan Scams
We have all seen the advertisements that guarantee the advertiser will be able to get or arrange a loan or alternate form of credit for a potential customer, regardless of the customer's credit history. These scams require payment before the lender is identified and the application is completed. Legitimate lenders rarely guarantee a loan or extension of credit before evaluating a consumer's creditworthiness.

Tips for avoidance:

• Do not pay for a promise. It is illegal for companies to make the promise of a loan by phone and require you to pay prior to delivery.
• Ignore any ad or call that guarantees a loan in exchange for an advance fee.
• Never give out personal information, such as credit card or bank account numbers, or your Social Security number on the telephone, unless you are familiar with the company and know why the information is necessary.

Identity Theft
Identity thieves can fraudulently access your credit report by posing as an employer, loan officer, or landlord. They can also access your personal information by finding a lost wallet, looking over your shoulder at ATMs and phone booths to get your personal identification numbers, stealing mail from mailboxes, and going through your trash.

You can minimize your vulnerability by:

• Keeping items with personal information in a safe place. Make sure that all items containing personal information, such as charge cards, statements, and credit offers, are disposed of properly.
• Carry only the identification information and credit cards that you actually need.
• Give out your Social Security number only when it is absolutely needed. Do not have it printed on your personal checks.
• Check your credit report yearly for accuracy and inclusion of only those activities that you have authorized.
• Keep track of your billing cycles, so that you know if a bill has not arrived on time.
• Review your credit card statements and phone bills each month for accuracy.
• Do not reveal any personal information until you know how it will be used, and if it will be shared with others.
• Be aware of lurkers when using the ATM or pay phone. Position your body so that they cannot see your PIN.
• If your state uses your Social Security number as your driver's license number, find out if another number can be used instead.
• Never give out your credit card or bank account information over the phone unless initiated the call and are familiar with the business.
• When creating passwords and PINs, avoid using your birth date, the last four digits of your Social Security number or telephone number, or a series of consecutive numbers.

To obtain a copy of your credit report, contact the following agencies. One or more may have a file on you.


Equifax
(800) 685-1111
www.equifax.com

TransUnion
(800) 916-8800
www.tuc.com

Experian
(888) EXPERIAN (397-3742)
www.experian.com

File Segregation
If you file for bankruptcy, and a credit repair company sends you a letter warning you about your inability to apply for credit cards, loans, and other credit for a period of 10 years. For a fee, the company promises to assist you in hiding your bankruptcy and establishing a new credit identity to apply for credit with. This is known as file segregation, and it is illegal. If you use it, you could face costly fines and even a prison sentence.

Typically, once you have paid the fee and signed up for the service, the company will instruct you to apply for an Employer Identification Number from the IRS. Once you receive the number, you will be instructed to use it in place of your Social Security number when you apply for credit. You will also be instructed to use a new mailing address and some credit references.

You may be told that the company or "file segregation" program is affiliated with the federal government; however, the federal government does not support or work with companies that offer programs such as these. It is a federal crime to make false statements on a loan or credit application, to misrepresent your Social Security number, and/or to obtain an EIN from the IRS under false pretenses. You could also be charged with mail or wire fraud if you use the mail or telephone to apply for credit and provide false information. It may also constitute civil fraud under many state laws.

The Credit Laws


The Fair Credit Reporting Act
Designed to help ensure that Credit Reporting Agencies furnish correct and complete information to businesses when evaluating your application.

The Credit Repair Organizations Act
Credit repair companies must give you a copy of the "Consumer Credit File Rights Under State and Federal Law" before you sign a contract, along with a written contract that spells out your rights and obligations.

The Fair Credit Billing Act and the Electronic Fund Transfer Act
Establish procedures for resolving mistakes on credit billing and electronic transfer account statements. They also protect your credit rating while a transaction is in dispute and limit your liability for unauthorized electronic fund transfers.

The Truth in Lending Act
Federal law requires disclosure of the "finance charge" and the "annual percentage rate"(APR)- and certain other costs and terms of credit- so that consumers can compare the price of credit from different lenders.

Equal Credit Opportunity Act
Prohibits credit discrimination on the basis of sex, race, marital status, religion, national origin, age or receipt of public assistance.

The Home Equity Loan Consumer Protection Act
Requires lenders to disclose terms, rates and conditions for home equity lines of credit with the applications and before the first transaction under the home equity plan. If the disclosed terms change, the consumer can refuse to open the plan and is entitled to a refund of fees paid in connection with the application.

The Fair Debt Collection Practices Act
Basically, you are responsible for your own debts, and if you fall behind, a "debt collector" may contact you. This law is designed to eliminate abusive, deceptive, and unfair debt collection practices.

If you have had a problem with any of the scams described here, contact your local consumer protection agency, state attorney general, or Better Business Bureau. Check your local directory assistance, or file a complaint with the Federal Trade Commission.