Blog
DEBT RELIEF SCAMS
Debt relief scams often involve deceptive practices targeting individuals struggling with financial difficulties. Here are detailed explanations of common tactics used in these scams.
1. Upfront Fees: Scammers demand upfront payments before providing any services, violating regulations that prohibit charging fees before successfully resolving debts.
2. Guaranteed Results: Fraudulent companies promise guaranteed unrealistic claims such as debt elimination, or achieving instant results are red flags. This is unrealistic since legitimate debt relief involves a process and cooperation with creditors.
3. Lack of Transparency: Scammers often withhold crucial information about fees, terms, and potential risks. Legitimate debt relief agencies are transparent about their services, costs, and potential outcomes.
4. Pressure Tactics: Fraudulent entities use high-pressure tactics, urging quick decisions without providing adequate time for research or consideration.
5. Unsolicited Contacts: Be wary of unsolicited calls or emails offering debt relief services. Legitimate companies usually don't reach out without prior inquiry.
If you suspect a debt relief scam:
1. Cease Communication: Stop engaging with the suspicious party immediately. Do not provide any further information or make payments.
2. Research: Verify the company's legitimacy by checking reviews, contacting consumer protection agencies, and consulting the Better Business Bureau.
3. Freeze Accounts: If you've shared sensitive information, consider freezing your accounts to prevent unauthorized access.
4. Monitor Finances: Regularly monitor your financial accounts for any unusual activity and report unauthorized transactions promptly.
Remember, legitimate debt relief options exist, but it's crucial to conduct thorough research and be cautious of red flags to avoid falling prey to scams.
HOW TO USE A SECURED CREDIT CARD TO INCREASE YOUR CREDIT SCORE
Using a secured credit card to increase your credit score can be an effective strategy. Here's a step-by-step guide on how to do it:
1. Understand Secured Credit Cards: Secured credit cards require a cash deposit as collateral, which usually serves as your credit limit. The best starting point is typically between $200 to $500. These cards are designed for individuals with no credit or poor credit to help build or rebuild their credit history.
2. Choose the Right Secured Credit Card: Look for cards with low or no annual fees and ensure the card issuer reports to all major credit bureaus (like Equifax or TransUnion). Once you have shown responsible use of the secured credit card, the credit card issuer often offer a path to upgrade to an unsecured card.
3. Use the Card Responsibly: Use the card for small, regular purchases you can afford to pay off each month. Aim to keep your credit utilization ratio (the amount of credit you're using relative to your limit) below 30%, preferably around 10%.
4. Pay Your Balance in Full and On Time: Always pay your balance in full by the due date to avoid interest charges and demonstrate responsible credit behavior. Set up automatic payments or reminders to ensure you never miss a payment.
5. Monitor Your Credit Score and Report: Use free tools or services to regularly monitor your credit score and report any inaccuracies. Over time, on-time payments and low credit utilization will help improve your credit score.
6. Graduate to an Unsecured Credit Card: After a period (usually 6-12 months) of responsible use, you may be eligible to upgrade to an unsecured credit card, which can further help improve your credit profile. When you upgrade or close your secured credit card, your security deposit will be refunded, provided your balance is paid in full.
7. Diversify Your Credit Types: Once your credit score improves, consider diversifying with other types of credit, like installment loans, to further boost your score.
Remember not to apply for multiple secured cards at once, as each application can result in a hard inquiry, which can temporarily lower your credit score. And don't forget that building or rebuilding credit takes time. Be patient and consistent with your credit habits.
Forbearance Agreement vs. Bankruptcy
In Canada, there are two main types of insolvency proceedings: bankruptcy and consumer proposals. Bankruptcy involves liquidating assets to pay creditors, while a consumer proposal is a negotiated settlement with creditors to repay a portion of the debt over time. Only a licensed insolvency trustee can file this in your behalf. However there are other options to form an agreement with your creditors to pay with your debts which is a forbearance agreement. This is a formal arrangement between a debtor and a creditor where the creditor agrees to temporarily suspend or reduce payments.
Forbearance is often used when a borrower is facing financial difficulties, and the agreement outlines the specific terms of the temporary relief, such as a reduced payment amount or a temporary halt to payments. Sometimes a forbearance agreement can be considered preferable to filing for bankruptcy for several reasons:
1. Preserves Credit Rating - A forbearance agreement allows individuals to negotiate temporary relief without the long-term impact on credit that bankruptcy may bring.
2. Maintains Control - Debtors maintain control of their assets and financial affairs during a forbearance agreement. In contrast, bankruptcy involves a trustee taking control of assets for distribution to creditors.
3. Avoids Legal Process - Forbearance is a private agreement between the debtor and creditor, avoiding the formal legal proceedings and public records associated with bankruptcy.
4. Rebuilding Finances - With a Forbearance agreement you're likely in a better position to recover financially once the temporary hardship passes. Bankruptcy, however involves a long road to financial recover as it can limit access to credit and loans.
5. Stigma - Bankruptcy often carries a stigma and professional stigma, which can impact business relationships, reputation or even job prospects in certain industries. Forbearance is usually viewed more favorably by lenders and employers.
However, the choice between a forbearance agreement and bankruptcy depends on individual circumstances. It's crucial to seek professional advice to determine the most suitable option based on one's financial situation and goals.
Ready to take control of your financial future?
Contact Prim Credit today for personalized financial planning, credit repair, and business consulting services.