How to Fix Your Credit by Reverend Luis Corts JR. & Karin Price Mueller

Author:Reverend Luis Corts JR. & Karin Price Mueller
Language: eng
Format: epub
Publisher: Simon & Schuster
Published: 2008-07-15T00:00:00+00:00

CREDIT COUNSELING SERVICES AND DEBT CONSOLIDATION

If have can’t seem to balance your bills, and negotiating directly with your creditors didn’t have the results you’d hoped for, you may want to consider a nonprofit consumer credit counseling service. You’ll pay for its services, but it carries more weight with a creditor than you do as an individual.

Consumer credit counseling services (CCCS) help you arrange payment plans (called debt management plans) with your creditors. Instead of paying your creditors directly, you’ll make monthly payments to the service, and it will in turn pay your creditors.

Using a service like this is a big deal. Like a bankruptcy, it will stay on your credit report for seven years. For that reason, don’t jump to this as an easy answer to your problems. It’s more of a last resort.

Some companies that offer debt management services are very reputable. Others are not. For example, some take several months to negotiate with your creditors. This could be a problem, because these services often advise you to stop paying your creditors while the negotiating process takes place. If you’ve been making your payments on time and then suddenly stop on the advice of a debt service, you’re going to add some bad marks to your credit report.

Dealing with CCCS will not necessarily eliminate your obligations to pay interest, but the service will try to negotiate so that interest charges are either halted or reduced, and it will ask for fees to be eliminated. Generally, debt repayment plans with CCCS last from three to five years. Your credit accounts will probably be suspended during this time, so you cannot make new charges.

If you use a CCCS, that fact will appear on your credit report. Creditors may mark “not being paid as agreed” on your report, and they may also report that they are receiving payments through a service instead of directly from you. After these notations appear on your credit report, it may take a few years before you’re able to get new credit. The marks will stay on your report for seven years. The good news is that they will not have a bad effect on your credit score.

If you don’t pick a reputable CCCS, and the one you choose makes late payments to your creditors, that will harm your credit. Payments will show as being late, and the fact that a service, not you, was late in making the payments won’t help the situation. You may see a company advertise on television, and it may say it’s a nonprofit, but that doesn’t mean it’s reputable. And remember that you might be best off simply calling your creditors yourself. That way, at least you’ll know for certain where your payments are going, and you won’t be paying extra fees to a middleman.

For help in choosing a credit counselor, check out the FTC’s brochure “Fiscal Fitness: Choosing a Credit Counselor.” Call 877-FTC-HELP, visit www.ftc.gov, or find the link on the Esperanza site, at www.esperanza.us. Then visit the Web site for the National Foundation for Credit Counseling ( www.

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