Your credit score is one of the most important numbers in your financial life. It affects your ability to secure loans, buy a home, and even qualify for certain jobs.
Unfortunately, scammers know this. That’s why they’re constantly devising new ways to steal your information, manipulate your credit, and leave you with financial headaches.
At CredEvolv, we agree with gold-old Ben Franklin, who once said, “an ounce of prevention is worth a pound of cure.” We’re here to help you understand the most common financial scams, how they can damage your credit, and what you can do to proactively protect yourself.
Scammers do this to open fraudulent accounts, make purchases, or take out loans in your name. If left unchecked, identity theft can leave you with maxed-out credit cards, delinquent loans, and a severely damaged credit score.
What are the most common financial scams that affect your credit?
Identity theft occurs when someone steals your personal information, such as your Social Security number, bank account details, or credit card information. Scammers do this to open fraudulent accounts, make purchases, or take out loans in your name. If left unchecked, identity theft can leave you with maxed-out credit cards, delinquent loans, and a severely damaged credit score.
Phishing scams trick consumers into providing personal information. Scammers do this through fake emails, text messages, or phone calls that appear to be from legitimate financial institutions. They often pose as banks, lenders, or even government agencies, requesting (and sometimes demanding) that you verify account details or passwords. Once they gain access to your accounts, they can rack up unauthorized charges or even change your login credentials, locking you out of your own accounts.
Credit repair scams target people who are looking to improve their credit. Fraudulent credit repair companies seize the opportunity to promise fast fixes, like removing negative information from your credit report or guaranteeing a high credit score overnight. These scams often require you to pay hefty fees upfront and can leave you in worse financial shape than before.
Loan and debt relief scams single out individuals who are struggling with their debt level. Scammers offer fake loan forgiveness programs or debt consolidation plans. They may require an upfront payment or personal information. Then, they disappear without providing any actual financial assistance. In some cases, they may even take out loans in your name, further damaging your credit.
Fake fraud alerts and tech support scams involve scammers impersonating fraud prevention services or tech support agents. They start by claiming that your financial accounts have been compromised. Then, they convince you to share sensitive information or transfer funds to a “secure” account, which they control.
How can common financial scams impact your credit score?
Financial scams don’t just take your money. They can significantly damage your credit score in several ways:
- Fraudulent transactions. Unauthorized charges on credit cards increase your credit utilization ratio, which negatively impacts your score.
- Missed payments. When scammers open accounts in your name, guess what? They don’t pay the bills when they’re due. Those missed payments are toxic to your credit score.
- Increased debt. Fraudulent loans in your name inflate your debt-to-income ratio and lower your credit score. That makes you appear riskier to lenders.
- Hard inquiries. Scammers applying for credit in your name trigger hard inquiries. Those can also lower your score, especially multiple hard inquiries in a short period.
How can I protect myself from financial scams?
Scammers are indeed becoming more sophisticated with their tactics. But there are some tried-and-true proactive steps you can take to safeguard your financial well-being:
- Monitor your credit regularly so you can notice unauthorized accounts or suspicious activity early. You’re entitled to a free credit report from each of the three major bureaus – Experian, Equifax, and TransUnion – once a year through AnnualCreditReport.com.
- Use strong, unique passwords for all your online banking and financial accounts. Consider using a password manager to keep track of them securely.
- Enable two-factor authentication (2FA), which requires an extra step, such as a code sent to your phone, before you can log in to your financial accounts. This adds an additional layer of security against unauthorized access.
- Be skeptical of unsolicited requests, because legitimate banks and government agencies will never ask for sensitive information like your Social Security number, account password, or PIN via email or phone. If you receive a suspicious request, contact the institution directly using a verified phone number.
- Freeze or lock your credit if you suspect fraud or simply want to add an extra layer of protection for accessing your credit. You can freeze your credit with each of the three major bureaus. This prevents scammers from opening new accounts in your name.
- Report suspicious activity immediately if you think you’ve been targeted by a scam. Get in touch with the Federal Trade Commission (FTC) at IdentityTheft.gov. Also, notify your bank, creditors, and the credit bureaus if you need to dispute fraudulent transactions and accounts.
How can CredEvolv help me restore or improve my credit?
If you’ve been a victim of financial fraud, recovering from the damage can seem like a nightmare. CredEvolv can ease your stress so you feel less overwhelmed. We connect you with certified, nonprofit credit counselors who can:
- Review your credit report for fraudulent activity. Our counselor partners work with you to identify and dispute any fraudulent accounts or errors.
- Create a personalized credit restoration plan. With your counselor’s assistance, you’ll develop a strategy to rebuild your credit that addresses your specific situation, including steps you can take to improve your credit score.
- Provide ongoing education and support. The credit counselors on our platform empower you with the knowledge to avoid future scams and maintain financial security.
Stay vigilant and stay informed with CredEvolv
Financial scams can happen to anyone, but by staying informed and proactive, you can significantly reduce your risk. If you’ve been affected by fraud or simply need guidance about how to improve your credit, CredEvolv is here to support you every step of the way.
Our mission is to help people like you regain control of your financial future through trusted, reputable credit counseling and smart financial strategies. So enroll in our platform today to get started on your path to financial security!