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5 Consolidation Red Flags to Look Out For

Debt Consolidation

Debt consolidation is a fact of life for many Americans. Usually the situation is a positive one where many debts are brought together under one roof, usually with a lower total payment and possibly even a lower interest rate, ensuring that the debt will be paid off more quickly than if they had been tackled alone. There is a downside to debt consolidation, however. As with any service industry, debt consolidation has its shady characters and unscrupulous companies that prey on the desperate and unformed. You don't have to be taken in by these types however, and here are 5 things you can look out for in order to avoid being taken in.

Red Flag #1 - We are a "Christian" Debt Consolidation Company

Not likely. This is one of the latest scams floating around on the Internet, which attempts to prey on the nature of many Christians to be trusting of others who come wearing the sheep's clothing of the faithful. You will see their website has a few choice quotes from the Bible on it as well as some information about tracts and may even point to a supposed church they are affiliated with. Odds are this company is CINO (Christian in name only) and is only using the site in order to bring more people into their "flock".

Red Flag #2 - Be Naughty so we can Play Nice

Any debt consolidation company that advises you to stop paying on your debt in order to "convince" your creditors that they should be afraid you're going to file bankruptcy is a scam artist and is, in fact, breaking the law. This is a common tactic used by many debt consolidation firms in order to make their job easier since the longer you've gone without paying your debt the more desperate they are going to be to collect something - anything from you.

Red Flag #3 - Claims to Clear your Credit Report

This is not possible, it's not legal, and it's not funny to watch them try. Many scam companies out there will offer semi-magical ways of actually cleaning up your credit report WITHOUT paying off your debt. There are highly illegal maneuvers that allow people to manipulate their credit reports, yes, but they don't work most of the time and if you get caught trying them you could face prison time. The fact is there are only three things anyone can do to repair their legitimately damaged credit report: 1 - pay down debt, 2 - wait for time to knock the negative reports off and 3 - begin using credit responsibly. Promises of anything else working should be a huge red flag.

Red Flag #4: Paying for a Credit Analysis

You don't have to give some clown of a company $100, or $75 or even $5.00 to get them to analyze your credit reports for you. You can either do it yourself or find a legitimate consolidation company that will pull your credit reports and analyze them for free in the hopes of earning your business.

Red Flag #5: Give us your Bank Account Number Until you've thoroughly vetted a credit consolidation company and agreed to work with them, seen all their paperwork and signed a contract (hopefully one you've had checked out by a lawyer), you should not give anyone your bank account number for any setup fees, analyzing fees or "contact initiation fees." Even if they promise these fees are refundable you should be on alert. At best, if you feel like you should pay for some up-front service, do it with cash or a cashier's check - not with a bank debit authorization.

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