May
16Bad Credit Repair Counseling
Tagged Under : Counseling
Credit counseling companies basically serve as mediators between the consumer and lenders. Instead of paying your debts directly to the lenders, you pay to the service. The service then takes care of making sure your debts are paid accurately and on time.
The big benefit to the consumer is that the counseling service works with the lender or lenders to negotiate a lower interest rate, a lower monthly payment amount, or both. If a service can’t promise you that, there isn’t much benefit to using it as opposed to continuing to make payments on your own.
Using a service can help you budget better, but there is no guarantee that you won’t face bankruptcy if you’re really at the end of your financial rope. According to MSN.com, only about half of individuals who use credit counseling are able to successfully complete the program.
How Credit Counseling Services Make Money
A good credit counseling service makes money by charging the lender a percentage of the debt owed for its services. Lots of lenders are willing to pay so that they can recoup as much of their money as possible instead of charging off the debt completely. This is similar to how collection agencies make money.
A bad service will charge the consumer a large upfront fee and make a lot of empty promises, often leaving the consumer in worse financial shape than before. Sometimes these are fly-by-night operations and they pocket a big portion of consumers’ cash and then disappear. They later re-establish themselves in a new office with a new company name and start the scam all over again.
To find a legitimate bad credit repair counseling service, it’s best to locate one that is affiliated with theNational Foundation for Credit Counseling. Don’t believe the ads that say you can basically forget about your debt or only pay back a tiny percentage of what you owe. Most of the time these claims are simply too good to be true.
The Effect on Your Credit
The fact that you’re using a credit counseling service will probably show up on your credit report. You may also get dinged for not paying your debts in full. It all depends on what your lenders decide to report to the credit bureaus. Sometimes the counseling service will be able to work something out to try to keep negative comments and information off your report; sometimes not.
If you’re having trouble with your debts, this doesn’t necessarily mean you need to use credit counseling. First, you should try to negotiate with your lenders on your own. All it takes is a simple phone call to inquire about a payment plan or ask for a lower interest rate. The worst that can happen is your lender will deny your request. It may be time to turn to a counseling service if you can’t even make your minimum payments, have serious trouble paying on time because you don’t have the money, or any negotiations you attempt on your own fall flat. Some financial experts say that you’re better off declaring bankruptcy if, even with the assistance of credit counseling, you won’t be able to pay back your debts in full within five years’ time. Note that this does not apply to mortgages, which you’re expected to repay over a lengthy term and which cannot be included in credit counseling contracts. Similar Posts:
