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Credit Help Companies Offer Debt Negotiation Programs For You |
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Attempting to get credit help through debt
negotiation is looked upon more favorably than filing for bankruptcy. One
question always roams in your mind if you are in trouble with your debt, "How to fix my credit, and raise my credit score?" The Fair Credit Reporting Act allows you to dispute information in your credit files with the three credit repositories, and the creditor is required by law to verify the disputed information. And if they can't do it in 30 days then it has to be removed. While credit help can be a do-it-yourself project, it is time consuming and tiresome. Debt negotiation as credit help is not the same thing as credit counseling or a debt management plan. It can be very risky and have a long-term negative impact on your credit report and, in turn, your ability to get credit. That's why many states have laws regulating credit help companies and the debt negotiation services they offer. The Claims Credit help companies that offer debt negotiation programs may claim they're nonprofit credit help organizations. They may also claim that they can arrange for your unsecured debt to be paid off for anywhere from 10 to 50% of the balance owed. For example, if you owe $10,000 on a credit card, a debt negotiation firm may claim it can arrange for you to pay off the debt with a lesser amount, say $4,000. The firms often pitch their credit help services as an alternative to bankruptcy. They may claim that using their credit help services will have little or no negative impact on your ability to get credit in the future, or that any negative information can be removed from your credit report when you complete the debt negotiation program. The firms usually tell you to stop making payments to your creditors, and instead, send your payments to the debt negotiation company. The firms may promise to hold your funds in a special account and pay the creditors on your behalf. The Truth Just because a company describes itself as a nonprofit credit help organization, there's no guarantee that the debt negotiation services they offer are legitimate. There also is no guarantee that a creditor will accept partial payment of a legitimate debt. In fact, if you stop making payments on a credit card, late fees, and interest usually are added to the debt each month. If you exceed your credit limit, additional fees and charges can also be added. All this can cause a consumer's original debt to double or triple. What's more, most credit help company that offer debt negotiation, charge consumers substantial fees for their credit help services, including a fee to establish the account with the debt negotiator, a monthly service fee, and a final fee of a percentage of the money you've supposedly saved. While creditors have no obligation to agree to negotiate the amount a consumer owes, they have a legal obligation to provide accurate information to the credit reporting agencies, including your failure to make monthly payments. That can result in a negative entry on your credit report. And in certain situations, creditors may have the right to sue you to recover the money you owe. In some instances, when creditors win a lawsuit, they have the right to garnish your wages or put a lien on your home. Finally, the Internal Revenue Service may consider any amount of forgiven debt to be taxable income. If you settle on a credit help company that offers debt negotiation, be sure to check it out with your state Attorney General, local consumer protection agency, and the Better Business Bureau. They can tell you if any consumer complaints are on file about the firm you're considering doing business with. Also, ask your state Attorney General if the company is required to be licensed to work in your state and, if so, where it is. |
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