How can I tell if an online lender is legit?

November 16, 2011 17:25 by Consumer Ed

Dear Consumer Ed: 

I applied for a $10,000 loan online.  I provided my Social Security Number and bank account information for the credit check. The company wants me to pay $1,200 up front (via wire transfer) to secure the loan.  They have a really good explanation for why they need the money up front, and I really want to send it, but I am afraid it might be a scam. How can I tell if a lender is trustworthy or not? 

Consumer Ed says: 

You are right to be concerned about this company and its request. Legitimate loan companies do not generally charge an upfront fee for a loan. Instead, they simply deduct any loan fees from the amount borrowed once the loan has been approved.  Another red flag is presented when a company asks you to pay via wire transfer. Scammers love wire transfers because they are hard to trace and it's practically impossible to get your money back once you have wired cash.
 
You should make sure the company has a legitimate street address and phone number. Avoid companies who use a post office box as their corporate address or who can only be reached by leaving a message on an answering machine or with a call-center operator. Companies who guarantee loans to anyone, regardless of their credit history, are typically scammers.
 
A good way to find a reputable loan company is to ask trusted friends or family members for a recommendation. You should also check the reputation of a company through the Better Business Bureau (www.bbb.org).  In addition, you can check with the city or county in which the company is located to verify that it has a valid business license. 
 
Don't provide your Social Security Number or financial account information to a company unless you first have determined that the business is reputable.  If you believe you have provided such information to a scammer, you should inform your bank or credit card company and request that they close down your account and set up a new one. In addition, you should consider putting a security freeze on your credit reports so that the scammer cannot open up a new account in your name.  To do so, contact each of the three credit bureaus:
 
          Equifax:  1-800-525-6285; www.equifax.com 
          Experian:  1-888- 397-3742; www.experian.com     
          TransUnion: 1-800-680-7289; www.transunion.com

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Financing company won't stop harassing me about old car loan

September 1, 2011 19:02 by Consumer Ed

Dear Consumer Ed:   
 
A financing company is harassing me about an old loan on a car I voluntarily surrendered.  I've been paying them $75 a month to stay off my back, but they are relentless.  How do I make them leave me alone?  

Consumer Ed says: 

First, it is important to understand the repercussions of voluntarily surrendering your car to the dealer or financial institution that carries your loan. The owner of your loan will sell your car at auction for what is often much less than what it would bring at a retail sale. You may be faced with large fees as well.  After your car is surrendered and sold, you become responsible for the difference between the amount you owed on your loan at the time the car was surrendered, plus fees, minus the amount for which the car sold at auction.  What happens is that you are now paying for a car that you can no longer drive and will never own.
 
Because you have had a prior business relationship with this financing company, calls are still permitted by the company even if you have your telephone number added to the "do not call" database.  If it is a debt collector who is calling on behalf of your financing company, the Fair Debt Collection Practices Act ("FDCPA") may apply.  The FDCPA does not apply to a creditor collecting its own past-due accounts; so, if the company calling you is the company that lent the money to you, the FDCPA does not apply.  However, if the company is using a third-party debt collector to contact you, you have the right to request that they not contact you again.  This request must be in writing.  Make sure to include a statement that your letter is not meant in any way to acknowledge that you owe this or any other sum of money.  Mail your letter certified, requesting a return receipt so that you have proof of its delivery.  Once the agency receives your letter, its employees can only contact you one more time to explain what action they plan to take.  After that, they must not contact you.
 
You can also request that a collection agency not call you at your place of work.  Send the same type of letter discussed above and instruct the debt collector to refrain from contacting you at work.  By law, the debt collector must comply.  Remember, though, stopping the contact does not stop the debt-collection activities.  The debt collector can still send negative information to the credit-reporting agencies, sue you in court, and garnish your wages or file a lien against your property once a judgment is issued by the court.

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Mortgage company not reporting loan payments to credit bureau

August 25, 2011 20:17 by Consumer Ed

Dear Consumer Ed:

My mortgage company is not reporting my payments to the credit bureaus.  I always pay on time, and I feel this information would boost my credit score.  Are mortgage companies legally required to report this information to the credit bureaus?

Consumer Ed says:

Although mortgage companies usually report mortgage loans and ongoing payments to one of the major credit bureaus, they are not legally required to do so.

It is possible that your mortgage payment information is not being reported because of a clerical error. If you have not already done so, contact your mortgage lender, explain the situation and request that it furnish your payment information to a credit reporting agency. If your lender refuses to do so, there are some other things you can do to improve your credit score:

  • Review the information on your credit report to make sure there are no errors or collection items that you are unaware of.  You can access your credit report for free by going to www.annualcreditreport.com. If you find  an error on your credit report, contact the credit reporting agency directly to dispute it.
  • Pay your bills on time, as late payments and collection items can send your credit score tumbling down.
  • Having a low debt-to-credit ratio will boost your credit score. So try to pay down credit cards that have balances at or near the credit limit. 
  • You shouldn’t necessarily cancel a credit card when it’s paid off, especially if you have had that credit card account for a long time. Keeping the account open, even if you don’t use the card, could help your score by improving your debt-to-credit limit ratio. In addition, older accounts contribute positively towards your credit score. 


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