Bad Credit? No Problem!

Aug 7, 2014 by

Scam Warning!Have you been turned down for a credit card or bank loan because of a poor credit rating? Then maybe you’ve been tempted to follow-up on ads making pitches like

Bad credit? No problem!

We don’t care about your past. You deserve a loan.

Unfortunately folks with low credit scores who are eager to improve their rating through responsible use of a credit card or on-time repayment of a bank loan often shrug off the uneasy feeling these sorts of ads cause and make a call to the lender.

But their financial challenges are about to be made worse. The ad likely promotes an advance-fee loan scam.

What’s an Advance-Fee Loan?

As the name implies, scammers pretending to offer loans without checking borrowers’ credit report will require an up-front payment to approve or disburse the loan. The applicant may be required to submit bank account and other personal information, which the scammer then uses to debit the account for undisclosed fees and sometimes wreaks other havoc by using or selling identify information. The loan never materializes, and the fees prove impossible for the applicant to recover.

Legitimate lenders may also charge application, appraisal, or credit report fees. But these lenders disclose these fees prominently and clearly, the fee typically is deducted from the loan proceeds, and the fees aren’t paid until and unless the loan is approved.

How to Recognize an Advance-Fee Loan Scam

I borrowed these Advance-Fee Loan Scam warning signs from an FTC scam alert, “Sure Signs of an Advance-Fee Loan Scam.

  1. The lender isn’t interested in your credit history. A lender may offer loans or credit cards for many purposes — for example, so you can start a business or consolidate your bills. But one who doesn’t care about your credit record should worry you.
  2. Fees aren’t disclosed clearly or prominently. Scam lenders may say you’ve been approved for a loan, and then call or email demanding a fee before you can get the money. Any up-front fee that the lender wants to collect before granting the loan is a cue to walk away, especially if you’re told it’s for “insurance,” “processing,” or just “paperwork.”
  3. The loan is offered by phone. It is illegal for companies doing business by phone in the U.S. to promise you a loan or credit card and ask you to pay for it before they deliver.
  4. The lender who uses a copycat or wanna-be name. Crooks give their companies names that sound like well-known or respected organizations and create websites that look professional.
  5. The lender is not registered in your state. Lenders and loan brokers are required to register in the states where they do business. To check registration, call your state Attorney General’s office or your state’s Department of Banking or Financial Regulation. Checking registration does not guarantee that you will be happy with a lender, but it helps weed out the crooks.
  6. The lender asks you to wire money or pay an individual. Don’t make a payment for a loan or credit card directly to an individual; legitimate lenders don’t ask anyone to do that. In addition, don’t use a wire transfer service or send money orders for a loan. You have little recourse if there’s a problem with a wire transaction, and legitimate lenders don’t pressure their customers to wire money.

What’s Your Experience?

Have you been tempted or victimized by an advance-fee loan scam? Are you aware of any legitimate creditor who will grant credit without checking an applicant’s credit score or report?

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  • Any place that has similar words anywhere near it is bad news. I have never used places like this, but I have helped people who have been scammed and basically robbed by them.

    • Is it my imagination or are there a lot more crooks working to rip off low income people than high income people? You’d think they’d go where the most money is, like Madoff did. But maybe they assume low income also means less educated, less sophisticated, so easier prey. Also people who are desperate I suppose are also more apt to be taken in by a scheme that seems to promise relief.

      • You’re right, Kurt. I guess they assume that since they are less educated, like you said, they are on easy target. It’s sad, but true. You’re doing a great job of educating people. That’s what I love about the internet and especially great finance blogs.

  • I would say that if you have bad credit, maybe a loan isn’t’ the best idea anyway. There are other ways to re-build credit without getting yourself into further debt. Why not pay your bills on time or get a pre-paid “secured” credit card?

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