Credit counseling

  • Posted by a hidden member.
    Log in to view his profile

    Oct 27, 2009 6:36 PM GMT
    I am going to see one next week to see if I can straighten out the some of the mess that my ex and I created together during our three-year suicide pact of a relationship. Have any of you been through this? You don't have to disclose the details of your finances... I just need to know if it was helpful for you.

    If any of you are credit counselors, can you give me a preview of what I have to look forward to?

    Thanks,
    A
  • Posted by a hidden member.
    Log in to view his profile

    Oct 27, 2009 11:40 PM GMT
    Be sure you go to a legitimate credit counseling service. There are a lot of those services out there that are scams. Sorry, I don't know how to tell you to distinguish betweeen them. Contact your Better Business Bureau; contact your state government's consumer affairs department; maybe look into Consumer Reports recommendations. Be sure to check out the service you use BEFORE YOU USE THEM.
  • cowboyathlete

    Posts: 1346

    Oct 27, 2009 11:46 PM GMT
    rigsby saidBe sure you go to a legitimate credit counseling service. There are a lot of those services out there that are scams. Sorry, I don't know how to tell you to distinguish betweeen them. Contact your Better Business Bureau; contact your state government's consumer affairs department; maybe look into Consumer Reports recommendations. Be sure to check out the service you use BEFORE YOU USE THEM.
    Agreed. Bear in mind that they often ask you to give up your credit cards as part of the process.
  • Posted by a hidden member.
    Log in to view his profile

    Oct 27, 2009 11:48 PM GMT
    There was an article on Yahoo Finance the other day about the most damaging credit mistakes you can make. Just a notch under filing bankruptcy was using a credit counseling service.

    I wish I could find that article now, but I can't.

    The problem is not only that a credit counseling service looks bad on your credit report, but they also specialize in debt settlements. To a lender a debt settlement is just as bad as bankruptcy. To them it means they're not likely to get back even a fraction of what you've borrowed from them.

    If you can negotiate to reduce interest rates and work out a schedule of payments that avoids a settlement, it will be much better for your credit rating.

    Then there's the problem rigsby mentioned. Some of them are just rackets that end up actually charging you money (sometimes lots of money) for their service.
  • metta

    Posts: 39112

    Oct 28, 2009 12:14 AM GMT
    I don't know but I would think that it might be helpful to start with the government resources:

    http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm


    http://www.justice.gov/ust/eo/bapcpa/ccde/cc_approved.htm



    I hope those linds are helpful for you. And of course, when it comes to stuff like this, make sure that you understand everything before signing anything.
  • Posted by a hidden member.
    Log in to view his profile

    Oct 28, 2009 12:31 AM GMT
    Debt consolidation, credit counseling.. These are just kinder and gentler debt collectors. They buy your current debt and create a low monthly payment schedule.. with high interest of course.

    Personally, I would advise against this type of service. They tend to do more harm then good. As mentioned previously, this all shows up on your credit history.

    Do you have a lot credit card debt? If so, then shop around for a new credit card that offers 0% interest for balance transfers. When I was out of work many years ago, I transferred my balance at least 4 or 5 times. Totally worth it. I saved a lot of money in the long run, by not paying any interest on my credit card debt. One of the cards I transferred to had a rewards program. So I ended up making a few bucks!

    If you have any sort of equity or if your credit isn't too damaged, you should try to get a personal loan to pay off and consolidate your debts on your own. The interest should be much cheaper than what you're paying collectively from all your debts. And you'll only have to worry about making one payment a month.
  • Posted by a hidden member.
    Log in to view his profile

    Oct 28, 2009 1:34 AM GMT
    My ex wife and I had over $220,000 in credit card debt and I did the debt reduction stuff. It works to stop interest rate increases, reduces your payment and extendes your term to something reasonble. My background is in mortgage brokering so I am familiar with the positive and negative ramifications of doing it.

    If you have $5k in debt you are wasting your time.
  • SwimNP

    Posts: 50

    Oct 28, 2009 2:02 AM GMT
    It might be best to work directly which each card company. They will offer you terms you may not even known were possible (waive penalties, extremely low interest rates, possibly credit back a portion of previous charges, etc.). What they can offer or put in exceptions for depends on a number of things.


    I wouldn't advise of a debt settlement agency. What they do is hold your money until they are able to negotiate a bare minimum percentage of your debt. Meanwhile, your debt is going further and further past due and damaging your credit. Just before it gets ready to write off (a major blow to your credit) they make their move. Some people don't know this but you can settle directly with card companies if you run into a large lump some of cash and probably won't be able to make monthly payments afterwards. Sure the percentage won't be outragishly low but the hit to your credit won't be near as bad.

    Credit counseling agencies are ideal for people that have many, many cards. If you have just a few cards or just one, work with that card company first.

    You can expect them to ask questions about your net income. They will ask questions about expenses such as rent/mortgage, car payment, student loans, and other revolving debt. They will use this to find your income to debt ratio. They want to make sure you can afford a lowered payment (some people think it looks good to have more debt than income but it's the opposite). Be honest and very open. They are going to ask stuff you might think is none of their business. They need to know because if you can't afford other things, they know you'll probably fault out of the program. It's a commitment and plan to commit to a fixed amount for a long period of time. Going through a credit counseling program or doing most programs through card companies usually closes your account.

    Source: I worked with business credit cards.

  • Posted by a hidden member.
    Log in to view his profile

    Oct 28, 2009 2:04 AM GMT
    Sahem - also, consider a not-for-profit agency (if you are not going to one already). An example is the Consumer Credit Counseling Service, which you will find in many communities nationwide.

    If you are a member of a credit union, some of them have third party relationships with an agency called BALANCE. It's a free service that from what I understand is provided confidentially and over the phone.

    (Also since a credit union is a not-for-profit and member-owned, there could be some local resources you can tap into at the branch. At a minimum they should be able to refer you to a reputable agency.)

    Anyway, just a few things to consider. Good luck!