What are my rights?
To trick you out of your money, some scams involve offers to lend you money or help you borrow money. Learn how to identify and guard against loan and credit scams.
Spot the scam
Scam 1. Loan scams
In a loan scam, a company tells you they can “guarantee” you a loan even if you have bad credit or no credit (that is, a poor history of paying back loans and paying bills). All you need to do is pay an upfront fee to “process the loan” or cover “insurance costs.”
You send this “advance fee,” but they don’t send the promised loan. Instead, they keep your money and send you a letter saying your loan application has been denied.
This is illegal in BC. It’s against the law for a company to charge an advance fee to obtain a loan, even if that fee is described as the first- or last-month’s payment.
Legitimate lenders never “guarantee” that borrowers will qualify for a loan before a credit check is done. In a credit check, the lender looks at a borrower’s history of paying bills and repaying loans, which are detailed in a credit report. A legitimate lender would want to review your credit report before approving any loan.
Scam 2. Bogus credit cards
Scams often target people who are having credit problems and haven’t been able to get a credit card. A bogus credit card scam will typically claim “guaranteed approval” for a credit card, regardless of your credit history. You’re asked to pay an upfront “processing fee” to get the credit card.
But you never receive the credit card. Instead, you get a list of banks you can then send an application to.
Or, if you gave out your bank account numbers, you might find money has been debited from your account without your permission.
If you’re one of the few who do get a credit card, you discover there are additional processing fees and annual fees you weren’t told about.
In BC, it’s illegal to make false or misleading statements about providing credit cards. Any company that promises approval and then doesn’t provide a credit card is breaking the law.
Legitimate financial institutions don’t issue credit cards without first checking your credit report. If someone offers you a credit card regardless of your credit history, be wary. It’s probably a scam.
Scam 3. Credit repair scams
The pitch goes something like this:
“Credit problems? You can now wipe your credit report clean of bankruptcies, judgments, foreclosures, and lien payments. AND IT’S 100% LEGAL!”
This is a credit repair scam. It promises to help you improve your credit report. The detail in your credit report helps businesses, banks, and others decide if you are likely to pay your bills on time. The scam typically urges you to dispute the negative information in your credit report or to set up a new credit identity for yourself.
In fact, there’s no legal way to erase accurate negative information from within the last five years from your credit report. After six years, negative information can be purged from your credit report.
When accurate negative information is challenged, if the credit reporting agency can’t verify the information within a reasonable period of time, the information is removed. But it may be only temporarily. If the information is later verified, it will be put back in your report.
Step 1. Know who you’re dealing with
If you’re seeking to borrow money, apply for loans through local banks and credit unions.
If you can’t get a loan yourself, a friend, relative, or employer may be willing to apply with you for a loan.
If you assist a friend or relative by co-signing for their loan, you’re equally responsible for the debt. If the other person can’t make payments on time, you’ll be held liable for the loan and your credit record may be affected.
Step 2. Research any offers
Ask for written information about a credit card offer or any other offer you receive. That way you can research the company’s background.
Contact the Better Business Bureau to find out what they know of the company. See what other people are saying about the company by searching online for their name together with the word “reviews” or “complaints.”
If the offer is from a bank or financial institution you don’t know, call them to ask whether the offer you received is genuine.
If the person who has contacted you insists you have to apply immediately, don’t apply. A legitimate financial institution will be just as happy to consider your application tomorrow.
Step 3. Protect your personal information
Don’t give out your credit- or debit-card information unless you’re certain the offer is genuine.
Don’t give out your bank account numbers to anyone unless you intend to have money withdrawn from your account.
Step 4. Seek help to improve your credit report
If you’ve got a poor credit history, get advice on how to improve your credit score. Your credit score is a number that expresses the information in your credit report at one point in time. It indicates the risk you represent for lenders, compared with other people, on a scale from 300 to 900. High scores on this scale are good. The higher your score, the lower the risk for the lender.
You can improve your score by improving your track record on managing credit. The Credit Counselling Society is a non-profit society that helps people learn how to better manage their money and debt.