Choosing a Credit Counseling Service
Not all credit counseling services are the same, offer the same services, or the same prices for what they do. There are some businesses out there that are less-than-reputable and have a history of not serving their clients well or legally. You need to be aware of the best methods of shopping for a credit repair service and know what things to avoid:
- Outrageous Claims
- Lack of Accreditation
- No Chance at Oversight
Some credit counseling services will promise you the moon without being able to deliver. Such claims as being able to eliminate your credit card debt through negotiation alone, or being able to get your creditors to accept just a few cents on the dollar as a settlement are claims that you should watch out for.
The Association of Independent Consumer Credit Counseling Agencies and the National Foundation for Credit Counseling are two credit counseling groups that work with such businesses to make sure they conduct their business in a fair and above-board manner. Make sure that any agency you plan to work with belongs to one or both of these two groups.
One problem with many agencies is that they will take the monthly payment that you send to them and then either not make the payment to your creditors or make the payments late, further damaging your credit score. A reputable company will have systems in place that will allow you to check on a regular basis to make sure that payments are being made in a timely manner on your behalf, and offer you recourse if there is a problem.
How Do Credit Counseling Services Work?
Credit counseling services negotiate with your various creditors on two levels: for some debts they will manage to get the principle amount owed on your debt reduced significantly. How much they will get your creditors to settle for varies depending on your individual situation, but under most circumstances they will not settle for less than $.40 cents on the dollar. More often than not, the settlement will be in the neighborhood of $.75 cents on the dollar or perhaps not at all. The other negotiation that may be made on your behalf is a reduction of the interest rate on your debt.
Once negotiations with your creditors are complete, the credit counseling service will serve as the "clearing house" for all of your payments to these creditors. You send them a single check every month and they, in turn, will make timely payments to your various creditors. If you are interested in repairing your credit yourself, take a look at credit self repair methods we have given.
