|
|
Tips for Consumer Credit Counseling - Should I Do It? Finding the Right Company
|
|
|
You have probably seen Consumer Credit Counseling ads on TV promising hope for those who are drowning in debt. Consumer Credit Counseling services (CCCS) offer what seem to be a magical pathway to getting out of debt. CCCS negotiates payment schedules with their client’s creditors and all the client has to do is make monthly payments to the CCCS Company. Seems simple, but is it really all that it seems to be?
A friend of mine who needed some help with his debt asked me if these services were effective or were they too good to be true. “Unfortunately, although there are good companies out there doing great work for people, if it sounds too good to be true it probably is” I told him. As if someone in debt does not have enough problems to worry about, this industry that has good intentions of getting people back on their feet has been plagued by fraud and mismanagement.
A good credit counseling company can help you get back on the right track. A bad firm can disappear in the middle of the night with your money and what’s left of your credit rating. If you are considering this solution for getting out of debt, the first thing I would do would be to Google “rip off report” with the name of the company and see what comes up. This should tell you a lot. The Better Business Bureau should also be able to give you good background information on the company as well. There are good firms out there, but you really need to do your homework and ask around.
How do you know if you need credit counseling?
• You are unable to make the monthly minimum monthly payments.
• You are being called by collections agencies and creditors
• You are consistently late on paying your bills
• You have failed to reach reasonable repayment plans with your creditors.
Just to be clear, if you are too far in debt a consumer credit counseling program may not be able to help you out. If you can’t make the payments that a consolidation program can negotiate, you may want to consider a bankruptcy.
What do I need to look out for and stay away from if I am going to sign up for one of these programs?
• Large up front fees. CCCS will typically charge you a $10 set-up fee. If you are paying more than this you may want to look elsewhere. There are hundreds of firms out there in the marketplace.
• The company is not accredited. A reputable firm will be listed with the BBB and the Asscociation of Independent Consumer Credit Counseling Agencies.
• Delayed Payments. If the company is pocketing your first month’s payment, your credit score will probably suffer. Some programs take this payment as part of their fee. If you start the program with good credit scores (which many people do) and they take your first payment as a fee, then they will not be paying your bills until the second month. When this happens your creditors will report your payments late and your credit score will drop like a rock. Find out where your money is going before you sign the contract and get it in writing.
• Blue Sky Promises. If the program or the promises made by a counselor sound too good to be true it probably is. There are plenty of other companies to work with so go with your gut and instinct.
If you are not behind on your payments beware. Many of these companies will try to get you started on a program in hopes of lower interest rates. They do not care if you need the program or not. They know that consumers get frustrated with the high interest rates that their credit card companies are charging them. If you are interested in lower rates, just call the credit card companies yourself and negotiate a lower rate.
You may be wondering what will happen to your credit and credit scores if you sign up for a credit counseling program? First of all, it is not the same thing as a bankruptcy and it will not trash your credit if the program is delivered properly by the CCCS Company. Creditors are very pleased with the results of their clients who enroll into a counseling program. The Fair Isaac Corporation has no negative association with a credit counseling program in relation to your credit score. In fact it is ignored. So if things go correctly, your scores shouldn’t be impacted.
Hopefully this information is useful to you. My advice is to not get into debt. The reality of debt is that it must be taken on in a responsible manner. Too much debt limits your choices for buying a new home, or a new car. Getting out of debt can take you a life time so be careful what you charge or decide to pay for later. I will take peace of mind any day versus worrying about making payments month to month. Live by your needs and not your wants. You will be much happier in the long run.
Dave Mason has been in the mortgage and consumer finance business for over 10 years. He has a Finance and Real Estate degree from the University of Arizona.
This Article is designed to be of general interest and should not be considered legal advice. The specific information discussed may not apply to you. Before acting on any matter contained herein, you should consult with your personal legal adviser.
|
Here is a translation of the Federal Reserve's surprise rate policy statement.
Read More...
|
|
|
|
|
Sabine State Bank provided a warehouse line to First Fidelity Mortgage Inc. The line was secured by customer notes pledged by First Fidelity. But the owner and president of First Fidelity began providing the bank with notes that he fraudulently prepared himself, according to the U.S. attorneys office.
Read More...
|
|
|
A New Jersey defense attorney has been named the central figure in a 14-count indictment with three others who are accused of racketeering, murder and $1.1 million in mortgage fraud.
Read More...
|
|
|
Mortgage rates have held fairly steady since the middle of last week.
Read More...
|
|
|
Don't give out personal data to a middleman, and make sure a dealer isn't sneaking in unwanted fees.
Read More...
|
|
|
|
