credit card counciling services: anyone use 'em to zero out/reduce credit card(s) balances?

  • rnch

    Posts: 11524

    Jun 16, 2009 10:48 PM GMT
    any recent success stories? if so, who did u use?
  • EricLA

    Posts: 3461

    Jun 17, 2009 1:07 AM GMT
    Most of these companies are a waste of money. They really can't do anything you could do yourself, unless you just don't want to take the time. There are plenty of non-profits and websites that can guide you on how to fix your credit. Negotiating with your creditors, correcting errors on your credit reports, strategies for managing big credit card debt/paying down multiple cards at the same time. It does take discipline, but the money you save doing yourself is probably worth it. And it helps prepare you for staying on top of things once everything is back ship-shape.
  • njnick

    Posts: 167

    Jun 17, 2009 1:11 AM GMT
    Yes, Eric is right - you can really accomplish this yourself these days. Just saw on CNN this morning that most credit card companies now are authorizing their field agents (the ones you get on the phone when you call) to cut deals with you on the amount you owe.

    It's similar to declaring bankruptcy, where the bad stuff will show up on your report for 7 years, but it will at least get you on your way.

    I actually used a service (CCCS -Consumer Credit Counseling Services) about 15 years ago - and found it to be a great thing for me at the time. Looking back at it now - they did charge a hefty fee, but at the time it was worth it.

  • DCEric

    Posts: 3713

    Jun 17, 2009 1:19 AM GMT
    Add me to the chorus saying these companies are useless.
  • styrgan

    Posts: 2017

    Jun 17, 2009 1:31 AM GMT
    Many credit counseling services ruin your credit in the process by telling you to stop making payments. This is how they get lenders to agree to lower your debt - by making your creditors desperate enough to accept just about whatever payment they can get.

    As someone who works in lending, let me assure you that using this scorched earth tactic will hurt your lenders. But it will also hurt you as well. Your credit could be damaged for years, and interfere with your life in many ways you may not expect. That's all in addition to a large upfront fee that many people will charge.

    There are others that are a part of the National Foundation of Credit Counselors that behave in a more ethically responsible way. But you're still probably not better off unless you are really having trouble making your payments.

    http://www.nfcc.org/
  • Posted by a hidden member.
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    Jun 17, 2009 1:59 AM GMT
    The NY Times took up this issue a few days ago:

    http://tinyurl.com/l7ruba
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    Jun 17, 2009 2:53 AM GMT
    I would recommend against credit counseling services.

    Most of these companies are nothing more than "kinder and gentler" debt collectors. They negotiate with your credit card companies and buy out the remainder of your credit card debt. Then they turn around and offer you low monthly payments, but with steep interest rates.

    And like styrgan mentioned, this will all be noted in your credit report.

    The thing that bites most people in the ass is the interest rate. Don't pay just a few dollars over the minimum payment. Check your statements and see the actual dollar amount of the calculated interest. Your payment should be way more than that amount.

    I was lucky. Back when I was unemployed, the economy was good and credit card companies were desperate for your business. I saved a lot of money by transferring my balances to any credit card that offered zero percent interest promotions. I must have done this like 3 or 4 times in a 2 year period. But now, I don't see too many of these offers.

    So my advice to anyone looking to get out of credit car debt..

    - Stop buying stuff. Buy only essentials. And pay cash.

    - Find a credit card that offers a low/zero APR for balance transfers.

    - If you can't do the above, transfer your remaining balance to an existing card that has a lower APR.

    - When sending your payments, pay more than the calculated interest. Pay even more on the cards with the higher APR.

    - After you pay off your cards, don't close your accounts. Just store the cards in your desk and let them collect dust. Having that available credit helps your credit score. But if you don't plan on buying a house or car in the future, then I guess it doesn't matter.
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    Jun 17, 2009 4:40 AM GMT
    this is timely for me:

    i have just paid off to zero a fourth account, and paid 40% of the limit on a credit card. i never used a company, because i was scared they wouldn't manage it as well as i could myself (once i finally sat down to figure out system for myself).

    i paid off a small bill, but its payment towards the next highest. paid that one off too. then put the two payments towards the third bill, as well as my fed/state tax refunds. i used that "extra" money to pay off the fourth one today, and a sizeable portion of a credit card that was annoying me. now i'm going to adjust my priorities: rather than pay off the remaining balance on the credit in two months i'm going to make minimum payments and almost double the payment on my car (which has 112,000 miles on it, and a remaining balance that far exceeds the value of the car - i'll pay it off in 8 months, rather than 17... i hope). my plan is to take the extra car money to pay off the next bill, and so on until i'm out of debt.
  • gibbay

    Posts: 59

    Jun 17, 2009 5:39 AM GMT
    I work for a credit card company in our collections department, so I have a bit of an inside take on them. They can be useful, but they also have some things that you should know about before you sign up with one of them. (I'm talking about how they affect your credit in Canada, so it'll be different elsewhere). Except for the first point, they're not in any particular order, as you'd want to take them all into consideration with equal weighting.

    First, make sure that when you sign up that you know you'll be able to make the monthly payments. An easy way to do this is as follows, the CCS companies we deal with bring the interest on our accounts to 0% (yet again, you need to confirm this with all your creditors to make sure they follow the same procedures) and we accept up to 5 years for payments. For each of your debts, divide by 55 to get the monthly amount that would go to the creditors in proportionately weighted amounts (I recommend using 55 as the number rather than 60 because the contract has to be accepted by all your creditors and if any of them are delayed until your next billing date then using a 60 divide would add more interest and could possibly change the timing enough to be refused by one or all). Take these amounts and add them up, and that would be the amount you'd have to pay each month for the creditors, the CCS fees would be on top of that amount, some might charge a percentage, some might charge a straight fee, but at minimum you'd have to make sure that calculated figure would have to be met, so if that amount is more than you can afford, then there's no point of even going in to the CCS office and you'll have to investigate other options

    Second, in our company we only deal with licensed non-profit CCS companies, and we have a list of those that we work with as well, so before you sign up with any CCS, talk to your creditors to make sure they will work with the CCS you will go with. I'd recommend you make a list of a few before you call so that you'll hopefully have one that will work for all of your debts. If you don't know of many, (or even if you do, I can't stress this enough) shop around to see what companies are available for your area. Look online, the phone book, ask your bank, the Better Business Bureau (or equivalent), etc... the more information you have the better equipped you are to make an informed decision on something that you'll have on your file for a few years

    Third, keep in mind that signing up with a CCS will put a mark on your Credit Score, so it will stay on your report for a few years after you sign up with them (depending on your country, but 7 is pretty standard). It's not as bad as filing a motion of Bankruptcy or Consumer Proposal, and definitely not as bad as having your account go to a third-party collection agency, but it's something to keep in mind. An earlier suggestion made in this thread was to negotiate a settlement with the company agent, if you can do that, it's good too, but (again, a different company might have different procedures for this, so check with your creditors) with us any settlement gets the account closed and reported to the credit bureaus as a settled account, so it'll be on your record anyways.

    Fourth, talk to your creditors to see if they have alternate payment options and how signing up for them in lieu of a CCS will affect your credit rating. A lot of people are under the impression that creditors are just harassing when they make calls, but in (reputable) lending companies, the people working the phone lines are trained in ways to help you pay off your debts in a way that will work for you. It does the creditors no good to have you declare bankruptcy or go to a third party collection agency because they weren't able to form a payment plan that worked around your income and expenses, so they have a vested interest in trying to help you pay off your debts. Even if it's just to ask to move your payment due dates to one that would fit your income schedule, you have nothing to lose by talking, and more often than not it'll help you out greatly.

    I know I've gone on for a bit, but I've seen way too many cases where people have got themselves in worse financial trouble than they needed to be because they weren't well informed of their options. I know this has been a theme in my post, but I want to close by stressing again that these are based on the policies and procedures of my company, and a different company might have slightly different P&P's so talking to every one of your creditors is the key to ensuring that whatever steps you take will work without surprises. Hopefully I've given you enough to steer you in the right direction
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    Jun 17, 2009 6:21 AM GMT
    i bow before your altar, oh god of the credit stuff, and would be content to call this conversation finished...

    wow...

    that was very helpful!