Consumer Car Buying Advice Blog

There are many ways that scam artists try and get you to part with your money. Don’t fall prey to one of these solicitations.

People with credit problems are often the victims

Here at Auto Credit Express, we come into contact with people with credit issues every day. Because people like this are especially vulnerable to credit scams, we want you to be aware of some of the more questionable loan practices.

According to the FTC, these scams often target consumers with bad credit problems or those with no credit. In exchange for an up-front fee (you pay them before they perform the service), these companies “guarantee” that an applicant will get the credit he or she wants — usually a credit card or a personal loan. Since this is an unsecured loan, it can be done by phone, over the internet or through the mail (more about that later) and, unlike a car loan, they don’t have to produce the item that you require the credit for.

The up-front fee can be as high as several hundred dollars. The Federal Trade Commission advises consumers to “resist the temptation to follow up on advance-fee loan guarantees. They may be illegal.” While many legitimate creditors extend offers of credit, such as credit cards, loans, and mortgages through telemarketing, and require an application fee or appraisal fee in advance, these fees are generally less than $50. Also remember that legitimate creditors will never guarantee, in advance, that you’ll get the loan.

Here is one more important point: according to the FTC, under the federal Telemarketing Sales Rule, “a seller or telemarketer who guarantees or represents a high likelihood of your getting a loan or some other extension of credit may not ask for or receive payment until you’ve received the loan.”

How to determine when a solicitation is a loan scam

Ads for advance-fee loans often appear in the classified ad section of local and national newspapers and magazines. Remember, just because a magazine is legitimate doesn’t mean they screen all their ads – especially the small ones in the classified sections. These ads also may appear in mailings, radio spots, on local cable stations and on the internet as part of a blind web site. Often, these ads feature “900″ prefix phone numbers, which result in charges on your bill. In addition, these companies often use delivery systems other than the U.S. Postal Service, such as overnight or courier services, to avoid detection and prosecution by postal authorities.

If you do your homework, it’s not hard to confuse a legitimate credit offer with an advance-fee loan scam. An offer for credit from a bank, savings and loan, or mortgage broker generally requires your verbal or written acceptance of the loan or credit offer. The offer usually is subject to a check of your credit report after you apply to make sure you meet their credit standards. Usually, you are not required to pay a fee to get the credit.

In their article the FTC mentions one more thing - hang up on anyone who calls you on the phone and says they can guarantee you will get a loan if you pay in advance. This kind of solicitation is against the law.

FTC tips on protecting yourself:

Here are some tips to keep in mind before you respond to ads that promise easy credit, regardless of your credit history:

•    Most legitimate lenders will not “guarantee” that you will get a loan or a credit card before you apply, especially if you have bad credit or a bankruptcy.

•    It is an accepted and common practice for reputable lenders to require payment for a credit report or appraisal. You also may have to pay a processing or application fee.

•    Never give your credit card account number, bank account information, or Social Security number out over the telephone unless you are familiar with the company and know why the information is necessary.

The Bottom Line

Here at Auto Credit Express, we want you to improve your credit, but we also want you to avoid the scam artists that only want to take advantage of you. Remember, “if it sounds too good to be true, it probably is”. Take this advice and we hope to see you “on the road” to better credit.

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