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Debt Counseling Solutions for Credit Repair  Ė  10 Tips on What to Watch Out For

By Sandra Wellman

Is debt counseling a solution for credit repair?


Debt Counseling Services and Credit Counseling Services are Organizations that are sponsored by most of the creditors. Most Debt Counseling services are nonprofit organizations; however, there are a few that are on their own. Before you can contact a Debt Counselor, you must have some source of income. The counselors often contact your creditors for you and alert them that you are making the effort to repay your debts. Once the creditors have been contacted, the organization will next work out an agreement that works with your current budget. After a decision has been reached you are expected each month to make a payment toward paying off your creditors. Your money goes first to the organization where you have asked for help, and then is forwarded to your creditors. Once the creditors receive your money, the Counselors ask the creditors to deduct a small amount of funds to pay for their services. There are some debt counselors that will waive interest on your balance, however, most counselors will not. If you are unable to meet your payments each month, you might be required to pay late fees. Getting the creditor off you back and off your phone line is great, but make sure you keep up with your payments or youíll be back in the same predicament.

 

What to watch out for when looking for a Credit Counselor or Debt Counseling Agency:

 

           They try to help you with all your bills, even ones you already have a low balance and or low interest Ė you may not need help with these and you donít have to have help with all your bills, you can just pick the ones that are really a burden.

             Make you pay by cashiers check or money order Ė they should accept your personal check in most cases, unless youíve bounced checks on them.

             Tell you they will call you back if you are approved Ė there really is no such thing as being approved. The agency may not want to help you if your problem is very small or so big they feel you should file bankruptcy, but thatís it.

              Ask for your credit card and bank account numbers before quoting you for their service. Do not give them this until you have the quote in your hands and you feel comfortable with this agency. You can give them other information they will need like balance, interest rate and creditor name.

             They wonít mail you a copy of their quote; they will only fax it to you. Donít accept that, move on to another agency. If you want a fax as well as mail, thatís ok.

             Tell you they will cut your payments in half. Unless you get a consolidation loan, your payments will probably not be cut that much. If they are, be aware exactly what kind of agreement they came to with the creditor. Ask for specifics.

              Each creditor will want a different payment plan Ė they all will not be the same, so here again, get specifics on what each creditor wants so you will know how long it will take to pay off all your bills. Donít accept a generic answer for this, ie; 4 yrs.

               Most agencies will not be able to handle your IRS debt and should not if they claim to, be wary. This should be handled separately through a tax expert.

                Be careful if they say they can reduce the actual debt you owe for one or more creditors. This is different than making payment arrangement for you. If the creditor agrees to write off part of your debt, it will remain on your credit report for 7 years. Also, you will have to pay taxes on the amount they wrote off!

               Compare the monthly fees you will pay for each acct they have made an arrangement for. These can vary from $10-$30 per acct per month!

 

If youíve already tried to make arrangements on your own or you just canít do it yourself, by all means get a credit counselor before it gets worse. Just beware of which company you choose. 

 

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Disclaimer: While we do our best to bring you the most accurate information available, each country and company has different rules and policies. You should always check the policies and procedures of the companies you do business with before making important decisions. We will not be held responsible for actions you take on your own. If you are not sure what to do to help yourself, please seek the advice of a licensed professional. Some links on this site are affiliate links where compensation is received when a sale is made.

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