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Beware of debt settlement or credit repair scams

With the tough economy, most people are struggling to make ends meet. Many have turned to credit cards to bridge the gap between income and bills, but that can only go on for so long. At some point, the debt from the credit cards and unpaid bills can become overwhelming.

When that happens, it can be tempting to look for an easy solution. So-called "credit repair" companies may seem appealing. But individuals should be aware that many of these companies take consumers' money without providing any real service. Here are a few ways you can know that a Florida credit repair or debt settlement company is really a scam.

In order for you to get real debt relief, the company you work with needs to actually provide you with a service. It is probably a scam if the company does not:

  • Inform you of your rights under the Fair Credit Reporting Act
  • Ask you to sign a contract that tells you what the company will do for you and how much you will be charged for their services
  • Explain how they will help fix your credit
  • Have a physical location

Likewise, there are many things that bankruptcy attorneys or real credit assistance companies cannot do. It is probably a scam if the company does:

  • Promise to delete collections, late payments, repossessions or a bankruptcy filing from your credit report
  • Call you out of the blue after you complete a bankruptcy
  • Refuse to accept payment by check
  • Offer to create a new credit report for you (Doing so is illegal.)
  • Request a large payment upfront

Reputable credit counseling or consolidation companies should not set off any of these red flags. However, the best way to get relief from debt may be consulting an experienced bankruptcy attorney. Many people do not realize that bankruptcy attorneys can provide alternatives to bankruptcy and explain all of your debt relief options.

Source: Lancaster Eagle Gazette, "10 tips to avoid credit-repair scams," Ken Amaro, 14 March 2011

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