Unless you’ve been living in a cave in the mountains of Peru, you’ve no doubt seen and heard ads for Consumer Credit Counseling Services. Of course anyone advertising such a service is going to make it sound great and reputable and like they deserve a medal of honor for the good work they’re doing out there. Well, folks – bad news.
We live in a world full of frauds and cheaters, and some of these debt counseling businesses just aren’t what they say they are. It takes a bit of research to ensure you’re not being scammed, but any time you put into the process will be well worth your while, believe me.
Is Credit Counseling Right For Me?
I won’t get into too many specifics but in brief: Consumer Credit Counseling is really only recommended if you barely cover the minimums on your credit cards, every month presents trouble rounding up enough money to pay bills on time but you are still making your payments, or you are constantly worried about your credit falling apart to the point that you’ll start getting calls from collection agencies and creditors.
If your credit is still good and have too much debt to where you haven’t been making any headway in paying it down you may be a good candidate for a credit counseling plan. If after talking to a credit counselor about a plan and they suggest that it will take you longer than 5 years on a plan to pay off your debt you might be a better candidate for bankruptcy. To go the bankruptcy route you will need to speak with a bankruptcy attorney. You may also consider reading some of the articles in GetPreQualified’s section on Bankruptcy.
Credit Counselors – What to Beware Of
If you have decided to go with consumer credit counseling, be very careful about whom you choose to represent you. This is a decision that is going to be with you for a long time, so don’t mess it up. (No pressure.) Be sure to investigate any company by checking with the Better Business Bureau and by Googling them to see if there are multiple complaints floating around out there.
Some of the more common warning signs of a less-than-reputable counseling service include:
- Big Talk. If the company you’re considering says it can settle your debt for pennies on the dollar without hurting your credit rating, run don’t walk to the next company on your list. Any reputable company will acknowledge that their power to negotiate a lower interest rate (not a near elimination of the sum of your debt) is its key selling point, and that it cannot control the effect of the counseling on your credit rating.
- Big Fees. You’ll find that Consumer Credit Counseling Services (actual affiliates of the not-for-profit National Foundation for Credit Counseling) usually charge a whopping $10 as a set-up fee. There are private, for-profit services that charge more but are also reputable and effective. Any company asking you for thousands of dollars up front, though, is an entity you want nothing to do with.
- Lack of Accreditation. If a company says it’s not-for-profit, an affiliation with the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling is a must. If you have any doubts whether the supposed not-for-profit counselor you’re considering is an affiliate, make them prove it.
- Lack of Payment. “Hey, where’d my first month’s payment go?” Sometimes companies will take your first payment and keep it as a fee instead of paying your creditors. Classy, eh? Be sure to ask up front if the counselor you’re considering is going to pull one of these, because it can – of course – damage your credit even further if your creditors don’t receive your first payment under this new plan on time.
- Lack of Statements. If they can’t or won’t provide quarterly statements, something’s fishy.
Consumer credit counseling isn’t for everyone and it beats ending up in a debt settlement plan, but it can be very helpful in some situations, and might just be the thing you need to get you back on a path toward financial well-being.
If you want more information on this topic please ask EdGAR.
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