A credit scam is a credit offered under pretenses. The scammer often shackles their target by making a significant promise they can't keep or hiding the actual cost of the loan.
Credit scammers use fake company logos, caller ID numbers, and other tricks to impersonate legitimate agencies and gain trust. When they offer you a loan, their goal is to do one or more of the following things:
Obtain personally identifiable information (PII) or financial information such as your social security number or credit card number;
Get permission to access your accounts or rightful ownership of your property;
Charge high-interest rates and hidden fees;
Charge for products or services that you don't receive.
Most scammers use the same bag of tricks. This means you can easily spot a scam once you know what to look for.
No Credit Check is Required
Be careful if the credit loan group advertises you can borrow money without a credit check. Legitimate lenders will thoroughly assess your ability to repay the loan by looking at your credit history, income, and employment history.
Tip: Having a low or bad credit score doesn't necessarily mean you don't qualify for a loan. In addition to banks, many trusted lenders will guide you through the entire lending process and work with you to choose a lending option that is right for you.
The Lender Requires Unusual Payment Terms
Payments for loans should be made to the lending institution. If the lender asks for an unusual form of payment — like a gift card or paying directly to a person — don't do it.
Also, be wary of lenders who ask you to wire them money for a loan, as it may be impossible to get money back from a wire transfer. Borrowers should never transfer money as part of a loan transaction, nor should they engage in a transaction that feels odd or uncomfortable.
Tip. Look for lenders that allow automatic debits, online payments, payments over the phone, and checks mailed to the lending institution. A legitimate lender will clarify the process, and you should have no questions about how to make loan transactions.
The lender is not registered in your state.
The Federal Trade Commission requires lenders and credit intermediaries to register in the states where they do business. You could be dealing with loan fraud if a lender does not list registered states.
Check the lender's website to check the loan scammer list. Contact your attorney general's office for further verification if you cannot find such a list. You may also contact your state's Department of Banking or Department of Financial Regulation to confirm whether the company operates legally in your state of residence.
Tip: Verifying the registry is essential in ensuring you are dealing with a legit company and separating the crooks from the legitimate companies.
The Lender Requires a Prepaid Credit Card
Some scammers require borrowers to present a prepaid debit card, claiming they need it for insurance, collateral, or fees. Legitimate financial institutions can charge a fee for the application, appraisal, or credit report, but these fees will be deducted from the loan.
A prepaid debit card is a sign of personal loan fraud. It's practically as untraceable as cash, and you can't report it stolen if you voluntarily gave it to a lender.
Tip: Legitimate lenders will not ask for money upfront. Application or closing fees are usually deducted from your total loan amount.
The Lender Solicited Your Business
Legitimate lenders do not solicit business by coldly calling, lettering, or visiting potential customers. It's illegal for companies in the United States to call potential borrowers and ask them to make payment on a loan or credit card before it's delivered.
If a lender approaches you, whether in person or online, they may be a scammer trying to get your sensitive banking information - don't give in to their hard sell.
Tip: When a lender contacts you, it should be because you contacted prior, whether using an online inquiry, a call, or a visit to a bank department.
No Physical Address
Look up the lender's address online or in a directory. Consider that a red flag if you can't find a physical location or clear contact information for the lender. Scammers intentionally make it difficult for you to contact them after deceiving you so they can avoid legal consequences. Reputable lenders have an address and clear contact information on their websites.
Tip: Call the phone number provided by the lender to confirm it is affiliated with their business.
Spelling and Grammatical Errors
While fraudulent lenders try to trick people into appearing legitimate on their websites or emails, spelling and grammatical errors are common in their communications. Mistakes in keywords or phrases can also be an intentional way to ensure emails pass through loan spam filters.
Be aware of missing your name after the salutation (most reputable lenders take the time to personalize their message) and awkward or misspelled greetings. If a lender's message or email looks unprofessional, assume it's a scam.
Tip: Check your email carefully. Reputable companies make sure their communications appear professional and error-free.
The Lender's Website is Not Secure
Lender websites can be tricky as fraudulent companies try to trick you with names and logos that resemble actual companies and create websites that look professional. If you enter personal financial information on a fraudulent website, it could be used to steal your money.
Tip: Look for a padlock symbol where the web address appears in your browser to ensure the validity of this website. This symbol and an "HTTPS" in the web address indicate that the site is certified safe and unlikely to be hacked.
How to Find Legitimate Lending Companies and Personal Loan Offers
Many people fall for personal lending group scams because they seek objective financial help and debt relief, but a trained advisor can help you find a better solution. Whether you've fallen for fraud or not, you can contact a nonprofit credit counseling center for professional help managing debt, improving your finances, and more.