Here’s yet another reason to consistently check your credit report: Debt parking. This is the term used for a new scam in which debt collectors place fake debts on your credit report in the hopes of fooling you to pay up.
As The New York Times reports, the debt parking scheme is simple, yet insidious. A debt collection company places an invalid debt on your credit report and then it sits back and waits. Typically, the invalid debt is tied to medical or hospital costs, as those are extremely common types of debt.
The scam kicks in the next time you apply for a loan or a new credit card. Suddenly there’s a “bad debt” on your report that is worrying the lender and dragging your credit score down. You panic because you don’t want to lose the loan, and opt to pay off the bogus debt rather than investigate it. As you can see, the entire debt parking scam is based on the hope that you don’t regularly check your credit report.
While the FTC is busy cracking down on the debt collection companies that have been involved in this fraud, the best way to avoid being a victim is to regularly do just that. You should be able to check your credit report through your local bank’s or credit union’s online banking. If you spot something suspicious, contact the lender, collection agency and the corresponding credit bureau to get it removed immediately.
This article was originally posted on savvymoney.com
The material provided on this page is for informational use only and is not intended for financial, tax or investment advice. VisionBank, PurposeBank, and/or its affiliates assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional and tax advisor when making decisions regarding your financial situation.