consumer credit counseling

[froggie]

Help!

My best friend carries a lot of credit card debt and has decided that 2007 will be the year for her to get rid of the debt. The only problem is that she is going through a consumer credit counseling service. She was told that she would be out of debt in about a quarter of the time that she could get out of debt on her own. They did get her interest rates lowered but they are charging her a $30 service fee each month.

Can you all give me some insight into this service? It just seems fishy to me but it may just be fear of the unknown

[shelbylovesmelby]

Re: consumer credit counseling

I have never used a counseling service. I did have a co-worker who used one of those places & they wanted 1-2 mo's worth of their monthly bill payments upfront, then they would pay the bills for them & get their interest rates slashed ect. Well they got their $ but were slow about paying their bills. In the end she ended up filing bankruptcy anyways as their budget was based on o/t & after 9/11 her dh didn't get the constant o/t anymore.

I think w/ the right mind frame & advice your friend could do it on her own w/o the service. JMHO

[poundwise]

Re: consumer credit counseling


Absolutely. Most of the 'credit counseling,' sometimes called 'debt consolidation' (which it isn't), services are terrible. There are some (few) legit ones but, even then, I don't think people realize what they can do on their own apart from such a service and also don't realize what using these types of programs do to your credit. (When you use one of these companies you may find that you will be treated the same as if you had filed Chapter 13 Bankruptcy. This is especially true for most mortgage lenders.)

I do believe there are some circumstances where using such a program can ultimately and overall be beneficial, I just don't believe that statement applies to most people who turn to them.

The FTC provides some solid information regarding these programs along with some good questions to ask if one chooses to utilize such --

http://www.ftc.gov/bcp/conline/pubs/credit/fiscal.htm

[PRICEPLUS]

Re: consumer credit counseling

I concur with poundwise on this one!

[vishenda]

Re: consumer credit counseling

have you checked how legitimate and credible the credit counseling agency is?do you know people who have gotten assistance from them?

[smartatmoney]

Re: consumer credit counseling

Debt Consolidation services hurt your credit terribly. They are considered the same as a chapter 13 bankruptcy for the purposes of getting a mortgage. Be very careful.

This article from money central has some good alternatives:

http://moneycentral.msn.com/content/Savinganddebt/Managedebt/P36230.asp

[mom-from-missouri]

Re: consumer credit counseling

A friend of mine check into one. They also wanted fees, but she listened to their speel, then went home and called me. We went over her bills, & then she started calling her cc companies. She had over 30 cc!!! those with no balance, she cut up and cancelled, except for 1, which is frozen in a block of ice in her freezer. The others, she told them she was trying to avoid going bankrupt and could they work with her. If she went bankrupt they would get nothing..wel--they could see her credit info, rating and debts and most worked with her. So, she did what the consumer credit counseling place was going to charge her for on her own. Last update I had from her, she has paid of 2, and is doing the snowball thing. She sold her home-mortgage was over 50% of her income, and is now renting for around $600 a month. The landlord let her repaint it and do the mowing (its a duplex) in exchange for her deposit. She was honest with him, showed him her paychecks and bills-told him he would come first and after 7 months she has kept up with that. She took her car back to the bank as she didn't want to wait 3 months & have them come get it. The banker took her by surprise though--he had another repo in the bank lot and told her he would work with it. She now has a 3 year old car that she bought from the bank and is paying about $300 for--her orginal payment on the new one was $720 something. Plus, that made her auto insurance go down as well. The banker also kept that off her credit record-not sure if hte consumer credit counseling place could have done that deal or not. Guess my point is, see what you can do on your own first. A lot of places will deal with you. Some of hers 'dropped ' the interest rate for 6 months, once cancelled her out and put her on lower payments and another lowered the interest rate.
How did she get into this mess??? But dropping her medical insurance to buy a fancy car--then got sick. DUMB DUMB DUMB

[pepperbradford]

Re: consumer credit counseling

I have used a counseling service for the past 4 years, and it was a great experience. I would highly recommend it in the right circumstance.

At the time, my wife and I had 3 credit cards with about $7000 on them, each at around 20% interest. We could barely make more than the minimum payments, and weren't making a dent in them. So we signed up for Consumer Credit Counseling Service out of Atlanta. They asked for one months payments up front, and we only paid one bill per month to them. For the $87 dollars we paid, they took $6, so they paid out $81 to the creditors. They reduced 2 of the cards to 6$, and one to 9%. After a year, they applied that initial months charge to our account. Any time you want, you can make extra payments.

One of the great things about it is that it's a great tool to use when you make that decision to change your lifestyle. We came to the point where we had to start living on a bidget and stop using credit. They were able to help us by staying accountable. In our service agreement, we knew that if we incurred any more debt, or signed up for new credit, it voided our agreement, and we would lose the 6% and 9% lower interest rates that they had negotiated for us.

Our only problem came when we wanted to buy a house. Being in a managed counseling service shows up on your credit as a collection account, or even a bankruptcy in some cases. But if you pay the original account down to 50% of the total, it gets removed. Plus, when you cancel or close your account, it dissappears from your credit report.

All I can say is that it worked really well for us, and we wouldn't be inthe good financial shape we are in now if we hadn't been using it for the last 4 years. In fact, we were able to close our account this past November, feeling very good about ourselves for having paid all of that off.

[Ima saver]

Re: consumer credit counseling

I have heard a lot of good things about the place you went to in Atlanta. For a small fee, they save you a lot in interest.

[vsjhoc]

Re: consumer credit counseling

A friend of mine check into one. They also wanted fees, but she listened to their speel, then went home and called me. We went over her bills, & then she started calling her cc companies. She had over 30 cc!!! those with no balance, she cut up and cancelled, except for 1, which is frozen in a block of ice in her freezer. The others, she told them she was trying to avoid going bankrupt and could they work with her. If she went bankrupt they would get nothing..wel--they could see her credit info, rating and debts and most worked with her. So, she did what the consumer credit counseling place was going to charge her for on her own. Last update I had from her, she has paid of 2, and is doing the snowball thing. She sold her home-mortgage was over 50% of her income, and is now renting for around $600 a month. The landlord let her repaint it and do the mowing (its a duplex) in exchange for her deposit. She was honest with him, showed him her paychecks and bills-told him he would come first and after 7 months she has kept up with that. She took her car back to the bank as she didn't want to wait 3 months & have them come get it. The banker took her by surprise though--he had another repo in the bank lot and told her he would work with it. She now has a 3 year old car that she bought from the bank and is paying about $300 for--her orginal payment on the new one was $720 something. Plus, that made her auto insurance go down as well. The banker also kept that off her credit record-not sure if hte consumer credit counseling place could have done that deal or not. Guess my point is, see what you can do on your own first. A lot of places will deal with you. Some of hers 'dropped ' the interest rate for 6 months, once cancelled her out and put her on lower payments and another lowered the interest rate.
How did she get into this mess??? But dropping her medical insurance to buy a fancy car--then got sick. DUMB DUMB DUMB

Your friend did a GREAT job of dealing with all this on her own.

Another problem with the bad agencies is that they hold your payments so they can earn interest, but meanwhile you get dinged with another late payment on the credit reports they are supposed to be helping you fix.

[boefixepa]

Re: consumer credit counseling

There are good companies out there, but like everything you need to do your own research and understand what it is they are doing, and how they are going to do it. It can be done on your own, but if you don't have the displine, desire, or patience it may be better to get help. Due diligence is a must, there are alot of companies out there ripping people off. Knowledge is power, find out what you are getting into and then decided if it is worth the cost and benifits. If you just go in blind hoping for a miracle, well that was scams are made of.