Understanding Credit Counseling Services
Credit counseling services have helped millions of people break the debt cycle. If you’re considering counseling, review these frequently asked questions to learn more about the credit industry and its practices.
Most are considered tax-exempt non-profit organizations, however not all of them are. Before you sign up with a service, verify that it’s not more interested in turning a profit than it is in helping you. Start by checking them out at the Department of Justice’s bankruptcy website and the Better Business Bureau. Remember, being non-profit doesn’t automatically make them legitimate.
For the most part, they can help you resolve any debt situation, but the various options aren’t available for all debts. Mortgages and student loans usually can’t be settled or entered into debt management programs. Student loans can be consolidated, however. You may also be able to reduce car loan interest through debt consolidation. Medical bills and credit card bills are the easiest for credit counselors to deal with.
Most services are actually funded by contributions they receive from creditors. Many also receive a portion of the funds you pay into a debt management program. Review the organization’s website for a complete disclosure of their funding sources. If you can’t find one and they won’t provide the information to you, consider using a different service.
Fees vary, depending on the services you need. The initial consultation should cost no more than $50. If you can’t afford to pay, many will provide some services for free. A debt management program often includes a one-time setup fee or a monthly maintenance fee. Debt settlement frequently includes high fees. Debt consolidation may involve a smaller fee, or you could attempt to consolidate on your own. Educational materials are often available free. Money management courses may be free or offered for a small fee.
They must be licensed to operate in your state. Most are also certified to provide credit counseling. Before signing up with a service, ask if they’re licensed in your state and if certifications are current.
How Do I Know If I’m Being Scammed?
The fear of being scammed is one factor that keeps many people away from credit counseling. Most services are completely reputable and interested in helping you. As with any industry, there are a few bad apples, though. You may be dealing with a scammer if they:
* refuse to send you any information before you meet with them
* refuse to provide a written list of fees
* pressure you to sign-up that day or risk losing their great offer
* recommend a debt management plan before reviewing your finances
* offer to settle debts for pennies on the dollar
* offer to repair your credit for a fee
* recommend that you stop paying on your debts
* say they can cancel student loans or secured debts like mortgages
* don’t provide budgeting or money management education.
Although it’s important to choose a credit counseling service carefully, you shouldn’t let fear or shame keep you from calling them. A good credit counseling service can help you resolve your debts and learn how to avoid creating new debt. If you’re not sure how to tackle your debts, contact a service for more information about your options.
For more articles on Credit Counseling, visit: http://www.bills.com/credit-counseling-services/
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Credit Repair: Avoiding Scams!
The Credit Repair Professional
The credit repair business requires a clear grasp of the interaction of many factors. Credit bureaus, creditors, and collectors are each regulated under their own set of federal laws. There are state laws that may supercede the federal laws. In the background of all of this activity is Fair Isaac and Company that formulates your FICO Score based on the makeup of the information on your report. Credit repair professionals must have a working knowledge of all of these factors and more.And the Not-So-Professional
True credit repair professionals provide an incredibly valuable service. But there are also those that misrepresent themselves and the services they offer. These deceptive practices will waste your money, and in some cases leave you worse off than ever. Here is our list of the top offences…Authorized User Alert
Some so-called credit repair companies have been brokering "authorized user" status on credit card accounts. This involves making the customer an authorized user on someone else's credit card to boost the customers FICO score. This is not illegal, but you should be aware that Fair Isaac and Company, in response to this practice, has eliminated authorized user benefits from the new FICO scoring model. According to Fair Isaac, one of the three credit bureaus will begin using the new scoring model in September 2007. The other two credit bureaus will adopt the new model by mid-2008.The New Identity Trap
There is a busy little credit repair sub-culture that offers to help you establish a new identity by applying for an Employer Identification Number (EIN) which they suggest that you use in place of your Social Security Number. This amazes us! And it is a serious crime that could put you in prison. Steer clear.Promises Promises
Watch out for companies that guarantee results such as a specific increase in your credit scores in a specific period of time. Professional, reputable credit repair companies can produce dramatic results! But given the fact that there is no way to predict the responsiveness of the credit bureaus, creditors, or collectors it is inappropriate to make such promises, and a sure sign of bad business.The One-Dimensional Credit Repair Problem
Beware of credit repair companies that offer credit bureau disputes, and nothing more. They are most likely using software that simply pumps out dispute letters - repeatedly. This one dimensional approach to credit repair is certain to produce disappointment. Effective credit repair requires the skill to challenge the bureaus, creditors, and collectors alike; all with the knowledge and understanding of the legislation that governs them, and a grasp of how each change in your report can affect your FICO scores.Power Corrupts
I’m going to stray a bit from the category of credit repair scams and touch on two of the more egregious offenders in the credit reporting industry. Many people mistake size for honesty. Power can corrupt, and the journey to the dark side is often led by corporate attorneys who constantly test the limits of consumer’s tolerance. Credit repair can be tricky enough, but getting hoodwinked by the credit bureaus can be downright discouraging. Here are offenders that we encounter on a daily basis. False Credit
Every day untold numbers of consumers go to TransUnion's "True Credit" website and pay for what they believe to be their credit scores. What they get are deceptively named "TrueCredit" scores which vary significantly from the FICO scores used by lenders. Here is the (almost impossible to find) small print from the TransUnion website. "TrueCredit is not connected in any way with Fair, Isaac and Company; the credit score provided here is not a so-called FICO score. The credit scores of TransUnion may not be identical in every respect to any consumer credit scores produced by any other company."Not Free Credit Report
Are you starting your credit repair effort? You can get all three of your credit reports for free, one time per year, from AnnualCreditReport.com. Don’t be fooled by Experian's freecreditreport.com website! Here is the fine print: "When you order your free report here, you will begin your free trial membership in Triple AdvantageSM Credit Monitoring. If you don't cancel your membership within the 30-day trial period, you will be billed $12.95 for each month that you continue your membership." And it may not be so easy to cancel. The Office of the Attorney General of Florida lists the following issues in their investigation of Experian: "Deceptive advertising, misleading domain name, and failure to honor cancellations in violation of Chapter 501, Part II, Florida Statutes (Florida Deceptive and Unfair Trade Practices Act)."
Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.
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