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Credit Counseling - Are you overwhelmed with debt
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Personal Loans and Credit Score
Did you know that your credit score will most definitely impact the rate you pay on loans? That's right, the higher your credit score the lower your interest rate will be for a home mortgage, auto loan, credit card, and countless other personal loan deals. Conversely, the lower your credit score, the higher your interest rate will be if you are approved at all! Let's take a look at what is behind ... Read credit counseling article
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Responsible borrowing and spending is a necessary part of bankruptcy recovery. In some cases, it could take years to rebuild your credit. If you are interested in speeding up the process, you may want to try refinancing your Vermont mortgage after bankruptcy. Refinancing can improve your credit in as little as two years.
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Credit Counseling - Are you overwhelmed with debt
Hundreds of thousands of people overwhelmed with debt -- often credit card debt -- are turning to nonprofit credit-counseling agencies that have become as ubiquitous as ATMs.
But just like fast access to your cash, getting out of debt quick and easy isn't always good for you.
Many of these counseling agencies -- and I use the word "counseling" loosely -- have been set up merely to collect fees from debtors in exchange for negotiating an easy once-a-month debt-repayment plan. They do little if any debt counseling, so many people end up right back in credit card trouble.
Other credit-counseling agencies may be classified as nonprofit, but they aren't in business for the public good. They are often hooked up with profit-making ventures, such as companies that make debt-consolidation loans.
In fact, so many of these operations are questionable that the Internal Revenue Service, the Federal Trade Commission and state regulators recently teamed up to warn people about the problems that can occur when using an unscrupulous credit-counseling organization.
For example, some debtors end up paying high fees to set up a debt-repayment plan. Others end up with worse credit records than before they sought help because the credit-counseling agencies don't pay their clients' bills on time -- or at all.
The IRS, FTC and state agencies are urging consumers to be cautious when choosing a credit-counseling organization. They recommend the following:
" Don't be in such a rush to get your debts settled that you fail to read your contract. Understand exactly what services are being offered. If you are promised anything, get it in writing. Watch out for outrageous claims. For example, one credit-counseling organization I found on the Internet is promising that people can pay off their credit card debt for 50 cents on the dollar. "I find that hard to believe," said Lydia Sermons-Ward, senior vice president for marketing and communications at the National Foundation for Credit Counseling. "Most creditors are taking consumers through an enormous amount of scrutiny before they even reduce interest rates or over-the-limit charges." Credit card companies are rarely, if ever, settling for less money than owed, she said.
" Don't go for the hustle that the fees the organization requires are "voluntary contributions." Either a fee is required or it is not. Watch out for high monthly service charges. Most agencies now charge fees to set up a monthly debt-management program, also known as a debt-consolidation plan. Some agencies charge as much as a full month's consolidated payment -- usually hundreds of dollars -- simply to establish an account. In general, if the setup fee for a debt-management plan is more than $50 and monthly fees are more than $25, go elsewhere. If extensive credit counseling or other services are being offered, however, higher fees may be appropriate.
" Don't believe that an agency can remove legitimate negative information from your credit report. It is illegal for any organization to represent that negative information, such as a judgment or bankruptcy, can be removed from your credit report. Most negative information remains on your credit report for seven years. A bankruptcy stays on for 10 years.
" Don't sign up for a plan and do nothing to check whether your creditors are receiving their money. You can do bad all by yourself. Missed payments by the credit-counseling agency can still be reported to the credit bureaus.
" Don't neglect to do some homework. For example, call your local Better Business Bureau to find out whether the credit-counseling organization you're thinking about using has had a history of problems with clients. Go to the Web site for the National Association of State Charities Officials (http://www.nasconet.org/) and find the state agency that has oversight of charitable groups in your area. Check to see whether any complaints have been filed against the nonprofit.
The IRS says it plans to look at many of these credit-counseling organizations to see if they are truly nonprofit. IRS officials are concerned that some that may have qualified for tax-exempt status are really operations that automatically spit out debt plans the way ATMs dispense cash.
If an organization's primary function is to steer people to fixed debt-payment plans without offering significant education and counseling, the organization doesn't qualify for tax-exempt status, the IRS said in a statement.
Of course, there are many legitimate credit-counseling groups whose mission is to help people get out of debt and stay out.
But I'm glad the IRS is on this case. It's about time. Maybe the agency will eventually weed out the greedy groups that just want to collect fees with little regard for people's financial well-being.
Until the bad players are gone, however, if your credit mess stems from your spendthrift ways, get some serious financial counseling. Otherwise, your fast track out of debt won't last any longer than the $20 you're always getting out of the ATM.
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Credit counseling - The trick is finding the right agency
"Can't pay your bills? Tired of endless phone calls from collection agencies? We can help!"
Credit counseling advertisements are everywhere. And, if you're like many Hoosiers suffering from a holiday spending hangover, going to see a counselor might seem like the perfect answer.
The trick is finding the right agency.
"If it's a reputable company, I don't think that's going to set you backwards," said Barbara Crane, president of Indy's Momentive Consumer Credit Counseling.
But just because many agencies are classified as nonprofit doesn't mean they're looking out for financially strapped consumers. Some charge a fee to set up a monthly payment plan with creditors, then send the debtors out the door without any counseling or education to help them better manage their money. Other credit counseling agencies are in bed with for-profit firms that offer debt-consolidation loans.
"There's no quick fix solution, unfortunately," Crane said. "Unless there is a relative that is wealthy that remembers you in the will or winning the lottery, but usually it doesn't happen."
Credit counseling agencies promising and guaranteeing services should be questioned, Crane said.
"We are accredited by the national foundation for credit counseling," Crane said. "We have to report on a regular basis. We have peer reviewers and we have standards to follow."
(For agencies that do charge for the service, the average costs in 2002 were $13 for a budget counseling session, $23 to enroll in a debt management plan and $14 each month for debt management plan services, according to the National Federation for Credit Counseling, the largest and oldest nonprofit credit counseling organization.)
Because there are so many shady credit counseling servicesout there, the Internal Revenue Service, the Federal Trade Commission and state officials are trying to give consumers a heads up. Tips for your search
Check it out. The Better Business Bureau can help make sure the agency is legit. Visit www.indianapolis.bbb.org.
Read the contract. A written agreement should spell out in detail the services to be performed; the payment terms for services, including the total cost; how long it will take to get results; any guarantees offered; and the organization's business name and address.
Don't make your situation worse. Some organizations work for free, but others charge a fee. Watch out for agencies that package their requisite service fees as "voluntary contributions." That's an oxymoron: If the fees are voluntary, you don't have to pay them.
Follow up. If your payments are being made through the credit counseling agency, call your creditors and make sure they're receiving payments. Even if you are working with a credit counseling service, late or unpaid bills will still damage your credit.
For more information, visit www.ftc.gov or www.irs.gov.
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