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Settling your debts for a fraction of what you owe, sounds pretty tempting, isn’t it? However, companies that promise to help you to do this are often fraudulent, consumer advocacy website Debt Settlement Fraud warns. With thousands of people buried deep in debts and Debt Settlement Company’s popularity soaring high, debt settlement business is ripe for scammers. Debt Settlement salespeople, generally masquerade as genuine professionals and make impossible promises to lure you into a settlement plan. Sometimes, even this debt settlement scam misleads you about the consequences of debt settlement on your credit bureau reports as well. Most of the times these phony companies fail to negotiate settlements with the creditors and leave the task incomplete. Their real intention of these scam companies is to earn a commission or to collect up-front fees from you, even though the law prohibits advance payment. Stay alert and read on to know the ways to keep such debt settlement fraud at bay.

• If the debt settlement company solicits you by phone, your first and foremost duty is to ask them for their contact information. Fake companies generally refuse to give out a name and address and insist on immediate enrollment and payment for their programs. Immediately hang up, cease and desist further communication with such companies and seek out a debt settlement firm on your own.

• Better Business Bureau is the best place to check the debt settlement company’s rating. The BBB can inform you whether any prior complaints are lodge against the respective settlement company and whether those issues were satisfactorily resolved or not. If you still suspect the company might be fraudulent, you can call your state attorney general’s office to do some additional checking as well.

• Don’t forget to check whether the settlement company is a member of the Association of Settlement Companies, a trade group that promotes good industry practices. Make sure you confirm membership on the association’s website, if the company claims to belong to the group. A scam settlement company won’t be a trade group member in any way and if they claim so, they might have lied about that fact.

• Your next step should be asking the settlement company about the effects of debt settlement on your credit rating. Unethical companies generally assure you that there is no negative impact of settlement on your credit, while the truth is your credit score is bound to go down, when you stop paying your bills to save up money for a settlement. Moreover, the late and missed payments leading up to your settlement usually appear on your credit reports for seven long years and creditors can still call you to demand payment until a settlement agreement is reached. Lastly, while you continue to rack up late payment fees, your creditor can refuse to agree to a settlement plan or can sue you for it as well. However, a legitimate settlement company is honest about all these possibilities and generally warns you beforehand.

Keep the above mentioned points in mind and avoid a debt settlement scam in every possible way.