How to Rebuild Your Credit After Getting Scammed

In this week's episode of Money Confidential, Hannah shares her story of trying to restructure her debt—and getting scammed in the process.

Photo: courtesy

It can be so easy to get into debt-but much harder to get out. That's the situation for Money Confidential caller Hannah, a 28-year-old living in the Midwest, who ended up in debt for more than $30,000 due to spending in her early 20s.

Hannah was proactive, taking on a second job and trying to negotiate with her creditors to reduce her debt. But when she was unable to make a dent in it, she contacted a debt settlement service, who promised to help her pay down her debts. But she soon realized that she'd been had. "A couple of months in, they only paid and negotiated one account for me," she recalls. "And I look into my account, my debt settlement account-there's literally no money."

By then, her credit score had tanked-and she's now working on her own to try to improve her credit score.

Leslie tayne, Financial attorney, tayne law group

Over the years, the federal government and local state governments created laws that required certain licensing requirements and required these companies to now be compliant and more consistent with helping consumers. It weeded out most of the bad apples, but there are still those out there that exist that claim that they can do debt settlement. They take money up front and they say they're going to contact the creditors, but they really don't.

— Leslie tayne, Financial attorney, tayne law group

Debt settlement can be a real boon if you have a lot of debt, but only if you use a reputable agency. "With debt settlement, the idea is that you're going to reduce the balances that you owed," says Leslie Tayne, financial attorney at Tayne Law Group. "And you're going to have a new structured repayment plan. When I say structured, I'll give you an example. You have $10,000 of debt. It gets resolved for less. Let's say $5,000 or $6,000. Structured means it's going to be paid over a period of time, the goal is interest-free. And it's structured during a particular time frame to be paid off."

Tayne points out a number of red flags that a settlement agent may not be reputable, such as charging monthly fees instead of a flat percentage of what they save you, not having a physical office, pressuring you to sign up today and not take time to think about it-and, of course, having poor reviews on the Better Business Bureau or online. She recommends asking lots of questions of any consumer counseling service or debt settlement agent you contact, write down the answers, and take the time to think it over before you go ahead.

"It's understandable that it would be overwhelming," Tayne says. "And that's why you need to be in the right frame of mind, you need to gain some education from the experience, and you need to have a really good understanding and take your time in making the decision."

Listen to this week's Money Confidential-"I Got Scammed and Now My Credit Is Ruined. How Do I Rebuild It?"-for Tayne and host Stefanie O'Connell Rodriguez's tips for reaching your financial goals. Money Confidential is available on Apple podcasts, Amazon, Spotify, Stitcher, Player FM, or wherever you listen to your favorite podcasts.


Hannah: Unless you come from money, there is no one to help you.

Alexis: Honestly it feels like you just can't stay afloat and you're doing what you can and you're still barely above water.

Margo: I often feel like when I open up like that, I am opening myself up to judgment. And I know they don't judge me. But it's still like, well then why aren't you helping me?

Stefanie O'Connell Rodriguez: This is Money Confidential, a podcast from Real Simple about our money stories, struggles and secrets. I'm your host, Stefanie O'Connell Rodriguez. And today our guest is a 28-year-old living in the Midwest who we're calling Hannah-not her real name.

Hannah: You're supposed to be better financially off than your parents. I got a good degree from a top business school and I do have a good job, but I just feel like I'm never going to be able to like save money, and you got to have, like, amazing credit.

Stefanie O'Connell Rodriguez: Hannah started working to build her credit back in college when she got her first credit card.

Hannah: It was for emergencies and stuff. And it was, like, you know, just building my credit, just putting little things. And I felt really good about that, like, I am responsible. I worked throughout college. So I just felt like I am making my money. I'm paying my bills and I am in control and am on the right step to building a really good life financially.

And then I blew it.

Stefanie O'Connell Rodriguez: After college, Hannah's relationship with her credit card started to change.

Hannah: I felt so good that I had such a great credit score, I had American Express at one point. Like I thought I was balling. I flaunted that Amex. I was just like, oh, drinks, I'm like trips, you know, keeping up with my friends. I'm able to afford these clothes that I didn't wear in high school and junior high. So I kinda transformed in my early twenties.

Stefanie O'Connell Rodriguez: So what was that turning point where you start moving toward as you described it, blowing it?

Hannah: Uh, mental illness. I was diagnosed. I think I was 26 or so. I did feel a little bit of anxiety and FOMO from social media and trying to keep up with my friends.

I did not know a soul where I moved out of college and I thought that if I had nice clothes and nice shoes, I don't know, people would be attracted to me. And with a mental illness with bipolar. I mean, it's hypomanic. I just got this, this high, like this euphoric, like out of control, I just felt so good just finding a sale or a deal. I was just blowing money-well, credit, money I didn't have. And I didn't realize what exactly I was doing, just because I felt so good. But I was so impulsive and, you know, YOLO at the time.

Stefanie O'Connell Rodriguez: Do you feel like the feelings and the impulsiveness that led to those moments are something that has been helped with treatment?

Hannah: Oh yes, definitely. I don't have that impulse of, oh my God. If I get this I'm going to make friends from this, or because you know, someone's going to compliment my shoes and then we're going to strike up a conversation.

Stefanie O'Connell Rodriguez: After Hannah got her mental health diagnosis and started treatment, it helped her take control of her spending, changing the feelings and behaviors that initially led to her debt. But despite that, she was still left with an overwhelming credit card balance.

Hannah: My current credit card debt is $32,000. My monthly payment with my credit cards combined would be about $800. But over the past two to three years I've said, hey, I recognize this. Can you help me out? Can we do a payment plan? Can I have reduced interest? They didn't have anything for me.

I'm like, can I do this? And you'll get your money. No, that's a great idea, maybe later, but your credit score sucks. Well, how am I supposed to fix my credit score, if I'm not able to pay you. It's just so frustrating. Like you want your money, I'm trying to help you get your money, but you don't want to work with me. So I'm stuck.

Stefanie O'Connell Rodriguez: In addition to calling her lenders to try negotiating alternative repayment plans, Hannah also got proactive about out her debt by taking on a second job for additional income.

Hannah: I got it winter of 2020. And then obviously spring wasn't so great for us. And then we came back in May or June.

And once we got back people were the rudest, rudest people. We weren't able to have our dressing rooms open and people pitched a fit. They would throw their clothes and that just also took my anxiety and depression to just a whole nother level.

I remember this lady just screamed at me about the fitting rooms.

I broke down crying it was just madness.

So I was actually proactive, pretty early. And I think my credit score was somewhere in the upper seven hundreds and I went to US bank and I wanted a loan to help that out. Well, I was denied by US Bank, because you have to have an 800 to have a loan, so my disappointments started there

So I'm just getting desperate because nobody is able to lend me money.

Stefanie O'Connell Rodriguez: Unable to negotiate or consolidate her credit card debt directly with her lenders, Hannah starting looking for relief through third party providers and stumbled upon a potential solution billing itself as a debt settlement company.

Hannah: I again was looking for loans just through other third parties, and they popped up. So I'm like, oh my gosh, wow, this can be taken off my shoulders and wow, the sales guy just made me feel so comfortable. I mean, the phone calls that we had-I'm taking all these notes, all these details just made me feel so good.

I think there was one where I was just like crying in relief, like, oh my God. Like I thought the weight of the world was off me. Finally, someone is listening to me on wanting to fix something and working with me on a solution.

And then, a couple months in, they're like, you know, your credit score is going to start tanking because you're not paying anything. But they're like, it's fine because they showed me all these testimonies of people who were like, 'Yeah, within two to three years all my debts were paid off, my credit score was up.'

I was paying them like $350 a month and that was going into like a savings account for them. I guess there may be some other numbers that maybe I didn't totally get, but a couple of months in, they only paid and negotiated one account for me.

And I did a quick thing, you know, 350 times-I can't remember how many months it was. And I'm just like, okay, this is a couple thousand dollars-what are we doing? And I look into my account, my debt settlement account-there's literally no money.

So they're getting angry phone calls from me because my credit score dropped to like mid four hundreds. It was wild, but they're like, that's what it is, and blah, blah, blah.

This is a lie. This is not what I took down in my notes. I'm done.

I will say I got desperate for a debt settlement company because I pulled money out of my 401k to pay for debt, and that just felt awful. I thought that was rock bottom. Debt settlement company was more rock bottom, 'cause I opened up to them as well, trying to be proactive. And I just feel that I got taken advantage of, and it's just like, who is there to help?

And now I won't be able to get a house. I kind of feel like in romantic relationships and not that I'm in one or, but I feel like at some point, if they know my debt, if I still have it, they're going to be like ew.

I'm 28 years old. A second job didn't work for me, can't get a loan, don't have money I can borrow from. So I'm like, this is fun.

Stefanie O'Connell Rodriguez: The whole experience of being taken advantage of and scammed in relation to debt she already felt vulnerable and ashamed about accumulating, compounded her feelings of hopelessness and shame around her finances even further.

Hannah: I thought I was like a little expert to all my friends and now I'm just like, well, I'm pitiful, you want to take me in? I will say, I am a few points away from a fair credit rating, so I do have some good things going for me. And I just need to dig myself out of this hole, this well, that sometimes fills up and I feel like I'm drowning,

I don't want anybody to, like, coddle me and be like, oh, here's some money. But like, resources, you know?

So it's kind of like I'm taking a step forward and two steps back because this interest just keeps mounding. But my mindset now is, you know what? I just want to have consecutive months of, hey, I'm paying my bills and let's build it from there. And as my credit score goes, then let's see what my options are. But right now I kind of just gotta eat the interest, pay my minimum, grow my score and see what I can get.

Stefanie O'Connell Rodriguez: Looking ahead you are making some progress, right? That credit score is rising. It sounds like you have a plan in place. How do you feel about moving forward? Do you have some optimism about it?

Hannah: Yes and no. Um, even paying the minimum, it's just so much. I just worry with paying all my other bills. I mean, I'm always going to pay rent. I'm always going to pay my car, that comes first. You know utilities, that eats up my paycheck after taxes.

And then I got a good couple of hundred in credit card bills that I'm just trying to pay the minimum. And at the end of the day, it's like, I don't really have money to save.

I mean, I've been working on a budget and I have to be very detailed with it, even though sometimes I have to force myself to really get in the nitty gritty of what I am spending on, what can I cut?

I sometimes get anxiety just looking at my accounts, but I have to tell myself, no, you have to do this.

Stefanie O'Connell Rodriguez: Although the experience can be painful and even embarrassing to admit, the truth is any one of us can fall prey to predatory financial practices and scams. Just in the past year US consumers have lost an estimated $432 million dollars and counting in COVID-related fraud and scams. Financial fraud can take many forms, from identity theft to the debt settlement scam Hannah experienced. And these scams are constantly morphing and adapting to meet the moment.

So after the break, we'll speak to a financial attorney who will walk us through some red flags to look out for, as well as 'green flags' that can help Hannah and all of us recognize financial resources that are legitimate and potentially even valuable resources, especially in moments of vulnerability.

Leslie Tayne: Financial scams happen across the board to every age, every race, every socioeconomic status, it doesn't matter, because they're clever and they create clever ways to trick you. And you might just have had a vulnerable moment.

Stefanie O'Connell Rodriguez: That's Leslie Tayne, financial attorney and founder of the Tayne Law Group.

Leslie Tayne's work helping clients manage and settle their debts is informed not only by her expertise, but also, her own experience.

Leslie Tayne: I borrowed a tremendous amount to go to law school. I didn't really think about it at the time. So I just signed the paperwork and I didn't really understand what I was signing. I graduated and all of a sudden the phone started ringing and they wanted it to be paid.

I was so overwhelmed with the debt that I just didn't want to deal with it. I really was putting my head in the sand. I had three babies under the age of two and a half. I then started my own law practice. I was working a million hours and he was responsible for paying the bills and I just deferred to him at the time. And I didn't realize there were problems until I got sued by my student loan company.

Stefanie O'Connell Rodriguez: There were three things you mentioned just now in your story that I feel like I have been hearing from listeners over and over again. One is thinking about my debt or looking at my bank accounts or opening the bills is so overwhelming, it's paralyzing. The other being, I am so torn between all of the things I'm already doing. In your case, you were talking about raising children, starting a law practice, all these other things. The idea of financial planning and debt strategy is just like a bandwidth issue. And then the third being literally money.

So I have all of these things I have to do. Pay rent, pay utilities and I owe 500, 600, 700, 800, $900 a month to my credit card company or to my student loan provider or whoever it is. Those are all themes that have come up over and over again. And in a lot of situations, they can feel really insurmountable. And so what do you say to those people who are kind of feeling paralyzed by one or all of those three things?

Leslie Tayne: Remember you're not alone and that what you're feeling is normal. It's something that happens. It just doesn't necessarily feel that other people have those experiences because you feel shut down. You don't want to talk about it. You feel embarrassed or ashamed. You might be very successful. I graduated from law school. I should know these things.

You might be putting a lot of pressure on yourself unnecessarily. And if you're struggling, it's okay to ask for help.

Stefanie O'Connell Rodriguez: Asking for help is one thing, but knowing where to find that help, and ensure that it's trustworthy, especially when it comes to money, can be hard.

Leslie Tayne: I think people first go to the internet. But the challenge going online is there's a lot of information and a lot of misinformation, and given the quality of websites and the quality of advertising on the internet, you could get sucked into the wrong place.

But reach out, seek some assistance. Ask for a lifeline and then give it some thought so that you're making a good decision with a clear head.

Stefanie O'Connell Rodriguez: It actually relates a lot to our listener story this week. She was trying to be proactive and reach out for help.

She called her lenders directly to see if she could work out alternative repayment strategies with them. But one of the things that she was finding was that some lenders weren't really willing to work with her unless she had an over 800 credit score. And so that led her to feeling like, "Okay. Well, if I can't get what I need from my lenders, I have to find something else." And then that led her to looking at third party options and eventually led her into a position where she did wind up falling into a debt settlement scam.

Leslie Tayne: So first I have to commend the listener for recognizing the issue, figuring out what the underlying issue is. Reaching out for a lifeline and looking into different options and trying to supplement the income, so that they were in a position to try to pay it off.

The challenge became, it's a little bit of a catch-22. So she has credit card debt and it's related to spending. So she gets the spending under control, she has a little more income, but her credit score is not good enough to refinance.

So with that, she then moved on to looking at debt settlement. So with debt settlement, the idea is that you're going to reduce the balances that you owed. And you're going to have a new structured repayment plan. When I say structured, I'll give you an example. You have $10,000 of debt. It gets resolved for less. Let's say five or 6,000. Structured means it's going to be paid over a period of time, the goal is interest free. And it's structured during a particular timeframe to be paid off.

Understand debt settlement does not include when you're current on payments. It also doesn't mean that you're going to get 10 cents or 20 cents on the dollar.

You're looking to structure it within your budget. So you need to understand what your budget is, what your available monies are and how it's going to be paid. And all of that needs to come in writing. And then after it's over, it needs to come in writing. And let me tell you how many times creditors make mistakes and not only make mistakes, but it could be at a collection agency and then it gets recalled back to the original creditor. And you're going to spend, sometimes we do, spend two or three or four months looking for the account and trying to get verification in the middle of a settlement.

So it's much, much more complicated than it seems. What it does is, it reduces your cash outlay by setting up a structured payment for less than what you owe. When it gets resolved, yes, it's going to show that you're behind on your credit report.

It's complex, but again, in its simplified version, it's reducing the principal balances, structuring it and then the debt goes away.

I actually think this is helpful.

Stefanie O'Connell Rodriguez:When do you get to the point of considering debt settlement?

Leslie Tayne: Certainly if you've examined debt consolidation and that's not an option for you, and you're feeling like you're having challenges meeting the payment schedule with the creditors and that the balance has never go down, those are some indications that you're ready for considering debt settlement for sure.

Stefanie O'Connell Rodriguez:Is there a standard fee structure for when you are working with someone to help you through a debt settlement?

Leslie Tayne: We work on contingency, meaning we earn a percentage of what we save the client. As soon as you see monthly service fees, that would be to me a red flag. Sometimes there's what would be considered upfront money, but immediately after your first payment, creditors should be contacted and the negotiation process should be started.

The good thing was that over the years, the federal government and local state governments created rules and laws that required certain licensing requirements and required these companies to now be compliant and more consistent with helping consumers. It weeded out most of the bad apples, but there are still those out there that exist that claim that they can do debt settlement. They take money upfront and they say they're going to contact the creditors, but they really don't. They wait for money to build up. And at that point, the consumer's frustrated, nothing's really been done. And the consumer then can't get in contact with them anymore because the number that they called originally was really a call center. And I caution people...and these are some of the red flags to look out for, when you get notices in the mail, when you see things on TV, or on the radio, you have to be cautious.

I'm not saying that all of them are bad or all of them are wrong, but I'm talking about consumer cautiousness, that many of them are call centers. And many times they're sales centers that are selling you on a program or process and you're not actually dealing directly with the company. And so with that, the consumer doesn't really know that because the person on the other line is well-trained, understands that it's a very emotional time when you're in debt. And it's challenging to make good financial decisions when you're going off on emotions, stress, anxiety, fear, unknown, all of that builds up and makes it very complex and difficult to make a good, clear decision.

And it sounds good. So when you're looking at these processes and when the listener was looking at these processes, she had great intentions-she was looking to help herself. The person she dealt with said, "Yes, no problem. We'll come up with a payment. We'll contact your creditors. We'll deal with them. And we'll get all your accounts settled and you'll be done in X amount of time. And we'll guarantee we'll settle it at X amount of percentage." And it sounds great, but here are the issues with that scenario. One, there are no guarantees in the debt settlement industry. I can guarantee there's no guarantees.

So when you're looking for a debt settlement help, or you're looking for debt help, you want an advocate. You want a partner, somebody who is going to take the time to understand what's happening to you, who's going to talk to you on a regular basis without the fear of charge, that everything is being done in the same office. Where is your money being handled? Who's handling the money. How are the creditors being paid? When are they being paid?

Stefanie O'Connell Rodriguez: I think for a lot of people it's such a vulnerable position to be in by the time you're considering debt settlement, right? And the words she used were things like, "I was desperate. I felt like no one was going to help me."

She was crying in relief because she felt like the weight of the world was off of her. And those are such powerful emotions. And to have a lifeline thrown at you, you want to believe it. And I know you mentioned some really good red flags to look out for. And I think that's really good to know. What are some of the green flags that we should be aware of? How do we know if this is a good sign of a good partner?

Leslie Tayne: So the reason why there's relief is because the person on the other line is understanding what your needs are. So there's an emotional side to this and there's a practical and business side to it. So yes, you're feeling relief emotionally. And what that means for you is that now you're in a position to make a good decision. So take a step back and now start thinking about how to ask the right questions. And that's the challenge. The challenge becomes that because she's never been in that situation or as a consumer, you haven't been in that situation before, it makes it difficult to know what questions to ask. So yes, one, it should make you feel good.

Two, it should answer all of your questions. Ask, "Am I going to be dealing with you throughout the process? And are you going to be with me every step of the way?" Where are they located? Green flag, they have an office, not working remotely. There's a physical office in a place, not PO box, not an office share, not any of those. And I'm not saying that those are bad things for certain business models.

What I'm saying is that in this arena, when it comes to being able to trust the company that you're working with, physical location, with physical people there, running it. What state are they coming from? Believe it or not, Some states are states that there's no regulation. Florida happens to be one of them, it's one of those states where it's like the Wild West and they don't regulate a lot of this type of activity. So there's a lot of companies in Florida, Texas, Arizona, they tend to pop up in those type of jurisdictions. So are they located where you're located? Can you go in and see them? That's a great green flag,

Where is the money being held? If you see a payment schedule where a portion of the money is now going to them before they settled any debts every single month-let's say the first six, nine or 12 payments, that's a huge red flag.

Do a simple online search, go online. And don't just stick to page one or page two, because as we know, some information can be buried, really take a look at who they are, who are the people?

Just because there's one or two negative reviews, that doesn't mean the company is bad, but consistently negative online reviews, bad with the Better Business Bureau, CFPB, which is the consumer financial protection bureau complaints.

The company hasn't been in business that long or they haven't really established themselves with creditors. And here's my favorite question. Is there anything I should know that you're not telling me or that I should be asking you?

Is there anything that I should know ahead of time about the processes or procedures that I haven't asked you yet? And let them fill you in. Let them do the talking.

Stefanie O'Connell Rodriguez: How do we know if those are the right answers that they're telling us?

Leslie Tayne: Definitely do your homework and see if a friend or a relative or somebody suggested that you work with that company, that would definitely be helpful. Another professional, we get a lot of referrals from accountants, lawyers, finance people.

Honestly, I would write down your questions. I would write down the answers. I would take a day or two or a week to even think about it. The moment you feel pressure, that's when you say to yourself, I feel pressure for some reason. And you know what, because I feel pressure I'm going to stop and think and give this some thought. Let it settle in.

So just because you got a letter and it has about the amount of debt that you have and specific creditors, or it looks like a legal letter. And you get those letters, put that address into the computer and see what turns up. Who is coming to you? And so I would caution you about letters and emails and that type of advertising, because again, your information can easily be bought and easily be found through the internet. So don't let that lure you into a false sense of security.

Stefanie O'Connell Rodriguez: I can just see how this is such a rife area for misinformation, for scams, because even as someone who's personally very obsessed with my money, I think I would feel completely out of my element.

Leslie Tayne: So let me give you an anecdote that we use in the legal world. So a lawyer who represents himself has a fool for a client. So what that means is that sometimes you can't do it by yourself. So I'm a lawyer, but sometimes I need a different type of advocate for me in a different arena. So there's no shame in asking for help.

For the consumer or for you, who's never experienced this before,

It's understandable that it would be overwhelming. And that's why you need to be in the right frame of mind, you need to gain some education from the experience, and you need to have a really good understanding and take your time in making the decision and not feel pressure to make that decision and not feel pressured to make that decision.

So don't lose hope, there are still good people out there, good organizations out there that can help you.

Stefanie O'Connell Rodriguez: One of the hardest things about making financial decisions, especially big ones, is the combination of high stakes and low information. It's no secret that the decisions we make about our money can have a huge impact on our lives, but at the same time, we're often just learning about the available financial tools and resources for the first time while we're in the process of trying to make those choices.

When you add in the emotions from past financial experiences and mistakes, which, by the way, we all make, it's no wonder we're vulnerable to misinformation and predatory practices.

That said, it's important that we don't let those bad experiences and missteps keep us from asking for help when we need it, and seeking out resources in the future. In Hannah's case, debt settlement might actually still be a potential option for her. A reputable and accredited financial professional who meets the 'green flag' standards Leslie Tayne mentioned - can help her make that assessment and explore other potential solutions for improving her credit while reducing her debt load.

The good thing is, Hannah is already on the right track - by prioritizing on time payments, she's rebuilding her credit; the mental health treatment she's received has already solved for many of the underlying struggles that led to her debt in the first place; and it's clear that Hannah continues to be proactive about assessing her repayment options and alternatives as her credit improves.

Armed with more information about red flags to look out for and green flags to follow - Hannah can slowly start to rebuild trust, not only in available financial products and reputable resources, but even more importantly, in herself.

This has been Money Confidential from Real Simple. If, like Hannah, you have a money secret you've been struggling to share, you can send me an email at money dot confidential at real simple dot com. You can also leave us a voicemail at (929) 352-4106.

Money Confidential is produced by Mickey O'Connor, Heather Morgan Shott, me, Stefanie O'Connell Rodriguez O'Connell Rodriguez. Thanks to our production team at Pod People: Rachael King, Matt Sav, Danielle Roth, Chris Browning and Trae Budde.

If you like what you hear, please consider leaving us a review on Apple Podcasts, or telling your friends about Money Confidential. Real Simple is based in New York City. You can find us online at, and subscribe to our print publication by searching for Real Simple at

Thank you for joining us and we'll see you next week.

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