More and more people are turning to credit counselors to help them get out from under a mountain of debt. Some consumers are finding out the hard way, however, that not all credit card counseling services are created equal.
One so called "non-profit" counseling agency pockets your first month's check, which you assume is being applied to your debts, and calls it a "charitable contribution."
Credit card counseling services like these may make you wary of seeking help from a consumer credit counseling agency, but if you know how to choose a reputable agency and you exercise a bit of caution, you can benefit from their services.
What Can I Expect From a credit card counseling services agency?
Credit card counseling services do not negotiate with your creditors to get them to eliminate late fees, extend the term of your loan, or even lower your interest rate. If your debt is burdensome enough, the credit counselor will encourage you to enter into a debt repayment plan requiring you to pay a set amount to the agency each month, which they then pay to your creditors.
The creditors determine the amount you pay each month and the terms of repayment, and not the consumer credit counseling agency.
Credit card counseling services will make you sign an agreement to not obtain any more debt until the current debt is paid off.
The problem with this service is that many of your creditors, even though they agree to accept a lower payment, still report you as late to the credit reporting agencies because you are not making the full minimum payment.
If they report you late, your credit report may show 30, 60, 90+ day late -- essentially ruining your credit. You will have a good reason for why your credit rating looks this way but it will fall on deaf ears. Creditors don't care why it looks bad.
Your future ability to get another loan will be impaired to a certain degree. And don't forget that as long as you're on the credit card counseling service plan, you can't get another loan anyway. You signed an agreement not to incur any new debt at the start of the process, remember?
An alternative to credit card counseling services is debt settlement. With debt settlement you reduce your balances and monthly payments. Remember, credit card counseling services work for whomever pays them and is most likely the banks and NOT YOU!
|
