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Credit Help Can Help Sometimes |
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At times, working with a
credit help agency can be rewarding. If you haven't had any luck negotiating with creditors on your own, then these agencies can often get them to eliminate late fees, widen your payment term, or lower your interest rate. But you need to select the credit help agency carefully. Quality can vary a great deal; so don't automatically sign up with the closest credit help service. There are many good credit help agencies out there serving people manage a burdensome amount of debt. But it is also true that this unregulated industry is pocked with so-called nonprofit credit help agencies that provide poor advice, charge excessive fees or steer debtors to for-profit sister operations that try to peddle debt consolidation loans or other financial products. Many credit help companies you see advertised on television are debt mills. Their purpose isn't to provide financial education. Instead, these firms exist primarily to collect fees from signing up as many people as they can for cookie-cutter debt repayment plans. Contact the National Foundation for Credit Counseling and the Association of Independent Consumer Credit Counseling Agencies for a list of credit help agencies that do business in your area. Then contact a few of the credit help agencies and ask them how they plan to help you. Get specifics for your situation. Also check with the Better Business Bureau to see if complaints have been lodged against the agency you intend to deal with. The Consumer Federation of America study also criticized some credit help agencies for having people pay unrealistic amounts of money each month toward their credit card debt, leaving them unable to cover their other bills and eventually leading them to bankruptcy. And in some cases, credit help agencies advised delaying bankruptcy even when it was the client's best option. Most credit help agencies are funded primarily by credit card companies based on the amount of money they collect for the lender, so it's in their best interest (but not necessarily yours) to have you devote as much money as possible towards your credit card bills. They may provide little help with other types of bills. Also find out about fees, which can vary a lot. A typical National Foundation for Credit Counseling credit help agency can charge up to $75 for setup and from $10 to $25 per month for a debt management program, where you give them a lump sum every month and they distribute it to your creditors. If the potential conflict of interest bothers you, but the fees don't, consider a credit help agency that isn't subsidized by lenders. Keep in mind that working with a credit help agency might affect your credit report. If a credit help counselor only helps you create a budget, you're okay. But if the agency gets the lender to lower its interest rate, eliminate fees or adjust your payments, they can contact credit bureaus and have a narrative code added to your credit record that states you're in credit help counseling. It's up to lenders to decide what to do with that information. Make sure the lender removes the notation from your report after you've finished the program. A Word of Warning! If you've somehow managed to keep your credit report clean as your debts have spiraled, you need to know there can be a downside to contacting a credit help counselor. Not every creditor looks upon your involvement with one as a good thing. While many creditors think it's great because it increases their chances of getting paid, others might issue an alert on your credit report. That could affect your chances of getting credit down the road. Not exactly what you're aiming for here. Is it worth the risk? That's something you'll have to decide: weighing the chances your credit report will take a beating anyway if you keep falling further behind. |
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