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Be careful, there are sharks swimming in that water

I was watching the news Thursday morning before work and saw one of those scary commercials.

You’ve probably seen them — the ones where the announcer says they can clean up your credit and get you back on track instantly.

Poppycock.

If anybody believes that such a thing is possible, I have a piece of beach front real estate for a great price in West Virginia I’d like to talk to them about.

This company, called Clean My Credit, promises to wipe out judgements and eliminate bankruptcies.

One woman even claims the company raised her credit score by 70 points. Chances are (if this were real) her credit score was so low to begin with that 70 points wouldn’t matter.

What scares me about these kinds of companies is who they are catering to — the people who can least afford them.

They come in with their pitch of making everything better, but never talk about how much it is going to cost the consumer.

They certainly never mention anything about any interest rates they’re going to charge, which are probably above 20 percent in most cases.

Or they never talk about any collateral one might have to put up for the services, such as a lien on their home.

They just make it look like everything can be made better with the waving of their magic wand.

These are evil programs and should be avoided at all cost — no pun intended.

There is also another shark in the same water, called the payday loan business.

If you have done any driving around downtown Suffolk you have surely seen them.

They usually offer anywhere up to $500 and will even hold post dated checks. Of course this all comes at a cost to the poor person who needs them.

Based on information I found from the Federal Trade Commission, it works like this:

“Usually, a borrower writes a personal check payable to the lender for the amount he or she wishes to borrow, plus a fee. The company gives the borrower the amount of the check minus the fee. Fees charged for payday loans are usually a percentage of the face value of the check or a fee charged per amount borrowed – say, for every $50 or $100 loaned. And, if you extend or &uot;roll-over&uot; the loan – say for another two weeks – you will pay the fees for each extension.

A cash advance loan secured by a personal check – such as a payday loan – is very expensive credit. Let’s say you write a personal check for $115 to borrow $100 for up to 14 days. The check casher, or payday lender, agrees to hold the check until your next payday. At that time, depending on the particular plan, the lender deposits the check, you redeem the check by paying the $115 in cash, or you roll-over the check by paying a fee to extend the loan for another two weeks. In this example, the cost of the initial loan is a $15 finance charge and 391 percent APR. If you roll-over the loan three times, the finance charge would climb to $60 to borrow $100.”

At that rate one would never get out of the hole. It’s much like the stories of borrowing money from a loan shark who charges huge interest fees. The only real difference is if you don’t pay the payday loan folks, they won’t come out and break your legs.

The only way to avoid ever using these kinds of companies is to not screw up your credit to begin with, which of course is an over simplification of the entire matter.

But if you find yourself in trouble, there are many legitimate sources out there that can help. If you are in need, find a legitimate source and clean up your credit. These other folks can’t do it for you.

Grant is the managing editor of the Suffolk News-Herald. Contact him at doug.grant@suffolknewsherald.com, or call 934-9603