Credit Scams

Credit scams are frauds by false pretenses. The object is to gain access to your credit line. It's done by tricking you into trusting an email, website, or person so that you provide your personal information. Criminals then impersonate you and run up huge charges while diverting your bills to other addresses. They may sell your credit card numbers or con you into buying non-existent items online from bogus stores.


"Free" credit report sites

By law, you are entitled to one free credit report a year from the "big three" credit reporting agencies (TransUnion, Equifax and Experian) without paying any fee or signing up for any service. These no-strings credit reports are only available online at the official site: www.annualcreditreport.com. You can order free credit reports at this site, but you must pay to see your credit scores (a small fee for each).

There are other free credit report offers online. Many offer all 3 credit reports with 1 or more free credit scores. But they're not really "free." You receive these free reports and scores in return for signing up for something - usually a credit monitoring service free trial.

They're an easy way to get your scores free, but canceling your membership may be a hassle. Make sure you read all the fine print. The deals usually allow a cancellation period before you're charged any membership fees.

But why would anyone sign up for a credit report monitoring service when they can already get free credit reports at www.annualcreditreport.com?  For these reasons:

  • They want a comprehensive report which combines 3 credit reports with free credit scores. Annualcreditreport.com does not give scores for free, and it doesn't bundle the reports.
  • Speed and efficiency. People may avoid annualcreditreport.com because of past experience. The site has been known to crash due to heavy traffic demands. You must also order each bureau report separately, which is time consuming.
  • They want credit scores but don't want to pay for them. People sign up for the service in order to get the free scores, and plan on canceling their membership as soon as possible.
  • They want credit monitoring. Some people want to see their credit reports more than once a year. They use annualcreditreport.com initially to get free credit reports, then choose a monitoring service for the rest of the year. Back To Top

Differences in Free Credit Report Sites

  • ETHICAL free credit report companies disclose upfront that you'll receive free credit reports and credit scores as part of a trial membership of their credit monitoring service. The upfront cost is usually a dollar that is refunded back to your account. In order to avoid further charges you must cancel your membership within a specified period of time.
  • SCAM companies conceal the credit monitoring information or else bury the disclaimers in very fine print. Suddenly you're charged $79 for a year of credit monitoring on the credit card that was supposed to only "validate" your information. Several large companies have been hit with fines for engaging in this practice.
  • CRIMINAL credit report sites send emails with an enticement for free credit reports. If you click on the link, it takes you to a "free" credit report site where your personal information is stolen.

Use credit report monitoring if:

  • You are rebuilding your credit and need to see it frequently
  • You are recovering from, or have reason to fear, credit fraud or identity theft
  • You want to automate the process of checking your reports frequently

Only you know whether monitoring is right for you. The FTC and Better Business Bureau both say that monitoring your credit report frequently is the best way to detect identity theft. Back To Top

Imposter sites

Some websites are illegal fronts for criminals to steal your personal information. Criminals often concoct these fake sites to resemble well-known, reputable businesses.

The shelf life of imposter sites used to be a few weeks; now sites go up and down in a matter of hours, making it nearly impossible to shut them down and prosecute the perpetrators. Watch out for the following tactics:

  • Phishing -You receive an email which appears to be from a well-known website like a bank or store chain. The email says it needs to confirm or update some of your personal information and provides a helpful link to their site. Unfortunately the link takes you to a phony site. These emails vary in sophistication and are sometimes littered with misspellings. People enter credit card numbers, passwords and all sorts of personal information, never dreaming that it's going right into a criminal's eager hands.
  • Auction tracking - Criminals scan recently ended auctions, and email bidders that they have won the auction when in fact, they haven't. The victims send money and never receive their merchandise.
  • Misdirection - People often misspell the names of websites when they type them into their browser address bar. Criminals know this and buy domain names with common misspellings of well-known companies and stores, hoping to catch victims this way. Back To Top

How to defend yourself

When dealing with unfamiliar sites:

  • Check for credibility icons like VeriSign or the Better Business Bureau seal and click on them. While these can be faked, often criminals won't bother.
  • When giving credit card information, make sure you are in a secure area. The browser address bar should show "https" rather than "http" and sometimes a small padlock.
  • Never click on an unknown link from an email or instant message! It can redirect you to a fake site. And never click on an email link requesting your personal information. Cut and paste the link directly into your browser instead.
  • Confirm all requests for personal information first by calling the company direct or visiting their website through a trusted channel.
  • Most legitimate companies send sensitive notifications only by mail or contact you by phone due to the massive amount of email fraud. Back To Top

Fix credit overnight scams

If your credit is bad and you're desperate to find loans, you might fall for the promises of a shady credit repair site. They claim they can erase negative payment histories, remove bankruptcies or even illegally create a new identity.

These claims are false, but people still fall for them. Unless information in your free credit report is wrong, it cannot be deleted. There is no quick fix for bad credit except changing your credit habits. Paying on time and reducing your debt are the best ways to see your credit scores rise.

Credit repair outfits are sometimes confused with credit counseling services which help people pay off their debt. However, some credit counseling services have a deserved bad reputation for charging high fees even though they are non-profit entities. Always check companies with the Better Business Bureau first.

Credit repair services are required by law to accept payment only AFTER their services have been rendered. Don't pay ahead of time. And remember -- there's nothing a repair service can do that you can't do yourself. For tips on how, visit our raising credit score area. Back To Top

How to defend yourself

Don't use the credit repair company if it:

  • Wants any money down before working on your credit
  • Doesn't tell you your legal credit rights
  • Tells you to establish a new identity using an Employer Identification Number
  • Brags that it overwhelms credit bureaus with error disputes to take advantage of a 30-day investigation deadline
  • Requests exaggerated fees Back To Top

Desperate emails from Nigeria

It's called the Nigerian scam though these emails may come from anywhere. This fraud involves emails that feature a heartfelt plea for help. Often these letters pretend to be from high-sounding government officials.

The pitch is that the person needs money in order to access millions of dollars that are somehow currently inaccessible. Maybe a fortune has been squirreled away in a Swiss bank, or a dictator's son needs to contest his father's will. The letter writer requests financing to undertake this sure-to-succeed mission. They received your name in the strictest confidence and are certain you are the one to help. By the way, you'll receive millions for your small contribution of a few hundred or thousand dollars.

It's incredible, but these over-the-top emails still find willing victims who are taken in by their own greed. Though many are too smart to provide their credit card numbers to unknown persons, they may take out cash advances on their cards and then send the money overseas. Back To Top

How to protect yourself

  • Delete emails from strangers with ridiculous, unbelievable stories
  • Don't ever send money to people you don't know unless it's the result of a legitimate transaction you initiated
  • Ignore email pleas from unknown persons

According to Snopes.com, the urban legend busting site, the Secret Service asks if you have been victimized by the Nigerian scam to forward appropriate written documentation to the United States Secret Service, Financial Crimes Division, 950 H Street, NW, Washington, D.C. 20223, or telephone (202) 406-5850. Back To Top

Id theft tactics

Identity theft happens when someone steals your personal information and opens credit accounts in your name. The bills are sent to a false address so you don't realize your credit is being destroyed until it's too late. While your financial liability for proven ID theft is usually capped at $50 per credit card, you may spend dozens of hours attempting to clear your good name.

Watch out for these top ID theft tactics:

  1. Shoulder surfing - Thieves watch or photograph your PIN numbers as you enter them. If they can see your name on your debit card, or your address on a check, they may be able to take your identity.
  2. Online background checks - All criminals need is your legal name to dig up your mother's maiden name, social security number, past addresses and more online. From there, it's easy to open fraudulent accounts.
  3. Crooked employees - Any employee at a business or office who has access to your credit card information could copy the information. There's not much you can do except regularly check your credit report.
  4. Combing through trash - A 2006 study found people are getting wise to this tactic, but still about 1% of credit fraud happens this way. Tossing out credit card slips, card statements, and other important financial information is risky; shred them instead. Thieves troll through trash looking for:
  • Credit card statements
  • Doctor's visit statements
  • IRS or Social Security information
  • Expired credit cards
  • Old checks
  • Bank statements
  • Insurance records
  • Internet purchase receipts
  1. Easy to crack passwords - Don't use your mother's maiden name (a key question banks and other companies use to determine identity), pet's name, children's names, birthdates or numbers like 123. Never use the last 4-digits of your social security number. In fact, never use only a word. Come up with an alphanumeric password composed of a word and numbers. Change it regularly.
  2. Limit the information you carry - Don't carry all your credit cards, social security card, or more checks than you need. It puts more information at risk should you lose them.
  3. Corporate breaches - Large companies frequently admit that hackers have made it inside their secured network databases. Millions are put at risk each year. You can't control this except to monitor your credit report for changes.
  4. Laptop thefts - Personal information is the goal in this theft, not the hardware. Many corporate breaches actually occur due to laptop theft.
  5. Mailbox lifts - What prevents anyone from going into your mailbox and simply taking your mail? Only a lock and key. Check into a secured mailbox if your neighborhood has a lot of transient traffic. Back To Top

Identity theft victims: Immediate steps

If hit with identity theft, take these steps.

  1. Place fraud alerts on your credit report - Call one of the credit bureaus (TransUnion, Equifax, or Experian) and place an alert on your credit file. This bureau will notify the others for you. A fraud alert requires new creditors to confirm that you authorized the new credit account. In truth, not all do this, so you should continue to monitor your report.
  2. Close accounts - Close all compromised credit accounts and reopen them with new account numbers. Don't have your new cards mailed to you until you secure your mailbox.
  3. File a police report - Contact local police and file a report. You'll need this report to give to creditors, credit bureaus and others to close your case. Some police agencies are reluctant; request a "miscellaneous report" if they won't take your case, or try another town or state agency.
  4. File a complaint with the Federal Trade Commission

After resolving identity theft, monitor your credit reports for the next few years to be safe. Back To Top

Fraud alerts

A fraud alert is good for 90 days. Some states offer a "credit freeze" which temporarily denies all new credit requests without your authorization.

A 7-year extended fraud alert can also be filed with proof that you have been the victim of identity theft. Back To Top

Security freezes

Many states have passed laws entitling consumers to add a security freeze to their credit report. The freeze prevents lenders from seeing your reports and in most cases even the most aggressive lender won’t issue credit. Thieves are nearly always stopped from opening fraudulent accounts. In some instances you must already be the victim of a crime and/or pay a small fee.

States that have incorporated the "freeze" law as of 2006:
California, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Kansas, Kentucky, Louisiana, Maine, Minnesota, Nevada, New Hampshire, New Jersey, New York, Oklahoma, North Carolina, Rhode Island, South Dakota, Texas, Utah, Vermont, Washington, and Wisconsin. Back To Top

Security breaches

34 states have passed laws that require you to be informed in the event of a security breach affecting your personal information. Breaches are far more common than you might think:

  • June 2005. MasterCard reported data theft which was estimated to affect 40 million cardholders. The same month, CitiFinancial lost backup tapes with records on 3,900,000 people
  • May 2006. Texas Guaranteed Student Loan Corp lost information on 1.7 million people
  • June 2006. Ernst & Young (UK) had a laptop stolen with data on 243,000 people
  • June 2006. A stolen server at American Insurance Group (AIG) compromised 930,000
  • Sept 2006. Circuit City dumped 5 data tapes with personal info on 2.6 million card holders

View a list of recent security breaches Back To Top

In your financial life, few things figure as prominently as your credit report and credit score. Learning the basics of the credit report process, and keeping your credit report free of errors, is essential to good financial health. You should focus on improving your credit score as the highest credit scores receive the best interest rates and loan terms. On a mortgage, a difference of 100 points could be worth hundreds of dollars each month.

Since 2005, all Americans have the legal right to obtain a free annual copy of their credit report from TransUnion, Equifax and Experian credit reporting bureaus. This law is intended to help consumers reduce errors in their credit reports by minimizing the obstacles to viewing credit reports. To receive a free credit report visit the official site run by the bureaus: annualcreditreport.com

Your personal credit score is a number from 350-800 which stands for your credit risk. The higher numbers are considered less likely to default. Credit scores come from mathematical formulas that measure many variables in your credit report such as payment history, public records, and debt to income ratio.

The Fair and Accurate Credit Transaction Act (2003) amendment to the FCRA Fair Credit Reporting Act guaranteed all Americans the right to see their credit report once a year to check it for errors. To learn more about free credit, credit scores and financial terminology, visit our glossary page.