3 Mistakes Debtors Make That Dig Them In Deeper

— -- I recently received a press release from the Federal Trade Commission—the nation’s consumer watchdog— that made my blood boil. It was about how the FTC cracked down on a credit repair company it says was charging consumers $2,000 up front before providing any sort of service to them.

It’s illegal for credit repair or debt settlement companies to charge consumers in advance, but it’s still happening. And paying these creeps when you’re already struggling financially is just one of the money blunders debtors make. Here are the top 3:

•Paying in advance for credit repair or debt settlement help. The Feds and the states have brought numerous lawsuits against companies that charged for debt help up front—then never did any work for the money. That’s right. They did nothing. Nada. Diddly squat. And it makes sense, because they already had the money and didn’t stand to make any more by actually helping people. That’s why there are rules in place barring these companies from charging before they do any work. Apparently, some unscrupulous ones still do. Don’t fall for it.

•Paying for credit repair you can do yourself. For some reason the government allows credit repair companies to continue operating, even though their industry is plagued with problems and many are outright scammers. The scam is when they claim they can get negative—but accurate—items removed from your credit reports. That’s a lie. On the other hand, if there are unflattering items on your credit reports and they’re FALSE, well then you CAN get those entries removed. But you can do it yourself! For free! If you’re in enough financial trouble that you have bad credit, the last thing you need to do is waste more money on questionable services.

•Paying for shady debt settlement services. If a company guarantees it can settle your debts for “pennies on the dollar” and make all debt collection calls and lawsuits go away, that’s one of those “sounds too good to be true” situations. Debt settlement can have huge potential problems. The Federal Trade Commission details a dozen of them here, including the fact that these companies often ask you to make “voluntary contributions,” which are really just illegal, up-front fees! They often tell people to stop paying their bills and cut off all communication with their creditors! Yikes! That will just further ravage your credit score, and soon the credit repair scammers will be after you, which brings us right back where we started.

Opinions expressed in this column are solely those of the author.

Elisabeth Leamy is a 20-year consumer advocate for programs including "Good Morning America" and "The Dr. Oz Show." She is the author of Save BIG and The Savvy Consumer. Elisabeth is also a professional speaker, delivering talks nationwide on saving money, media relations, and career success. Elisabeth receives her best story tips from readers, so please connect with her via Facebook, Twitter or her website, to share your ideas.