Home Buddies – Houston Credit Repair Coach for Investors and Homeowners

Advice for Credit Counseling

Credit counseling and Debt counseling has become a $7 billion industry. This industry is a part of our world that is filled with fraud, misrepresentation and controversy. Many tell you that they can help you get rid of your debts for pennies on the dollar. And, of course they usually want you to pay an upfront fee for that service. That fee can be as high as $3,000.

Because credit has become such a lifeline in the personal and business world, it carries more weight than the dollar we carry in our wallet. So anything with the word credit or debt, is something that we all need to be sure to educate ourselves on. We need to be able to protect and/or improve our credit ability.

There is a realm of different levels of companies that are offering credit counseling. Some may genuinely excel in their actual level of service and success. And of course there are those ‘fly-by-night’ outfits that may just have you doing all the work, and they decide to disappear with your money. And who knows for sure what they may have done to your credit score. Some do a good job of negotiating repayment plans. Others may be charging a large upfront fee, and pocketing much of that money that is supposed to be going to your creditors. Did you know that there are even some credit and debt counseling companies that are targeting people who aren’t even late on their payments? They are trying to enlist them into their services based only on the fact that those consumers just want a better interest rate.

Here are some things to watch out for:

Big upfront fees. Consumer Credit Counseling Services typically charge about a $10 set-up fee. If you’re paying more, make sure you’re getting exclusive, customized coaching that may even include a budgeting.

No accreditation. Legitimate credit counseling firms are affiliated with the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies.

Delayed or missing payments. Some companies try to pocket your first months’ payments as a fee, instead of passing the money on to your creditors. Missing payments can hurt your credit score. Find out how much of each monthly payment is going to your creditors, and when it will be sent to them.

Unrealistic promises. Some companies falsely promise that you can settle your debts for little or no money, without hurting your credit score. Legitimate credit counseling services help you pay back what you owe, at lower interest rates, and they let you know that there may be some affect on your credit score.

So how do you know if you need credit counseling or debt counseling? If you’re able to pay your bills and are current on all your accounts, and you are not running up a high balance on your credit, then you probably don’t need credit counseling. If your interest rates are too high, you usually can negotiate a lower rate with your credit-card companies just by asking – or telling them that you will move your account elsewhere.

But if:
You can’t pay the minimums on your credit cards
You’re consistently late paying one or more of your regular bills
You’re being hounded by creditors and collection agencies
Your efforts to work out reasonable repayment plans with your creditors have failed
You’re still running up high balances on your credit

Then you are certainly a good candidate for debt or credit counseling. Just remember that there are limits on how little your creditors can truly accept on cutting your payments. If your debt is too out of control, the credit counseling service may not be able to get the creditor to accept what will fit in your budget. And make sure that your newly negotiated payments aren’t going to be stretched on for years. The typical plan takes two to four years to complete.

And what about your credit now that you have done credit or debt counseling?
NO, it’s not going to trash your credit report, and it’s not worse than bankruptcy.

Credit counseling may have some effect on your credit, or it may have none at all. Some lenders may not want to do business with you after you’ve completed your plan, but others will. It usually depends on how your lenders report your account to the credit bureaus. It has been said that lenders now ignore any reference to credit counseling that may be in your file. Just be aware of how your creditors are reporting your activity. Are they still reporting you as delinquent until you’ve made 3 of those newly negotiated payments? That type of action will hurt your score more than a note about you being enrolled in credit counseling. Some lenders may even see credit counseling as a sign that you are being responsible and getting your debt under control. Lenders like to see that you are responsible and controlling your debt.

But unfortunately there are still some lenders who refuse to deal with anyone who has enrolled in credit or debt counseling. And if you fell behind on your payments before you entered credit counseling, you’ll find those late payments will still affect your credit score even after you’ve paid off your debts.

You should be caring about your debt, and your credit. Seek help from a company that is going to care for it as well.

Good luck.

Barbara Partaka
Home Buddies