Credit Counseling: Protect Yourself From Scams, Be An Informed Consumer
Sharon L. Secor
October 11, 2007
With the shock effects of the sub-prime meltdown and the deflation of the housing market rippling through the economic system, many people are struggling to manage their personal finances. Skyrocketing adjustable rate mortgage (ARM) payments, high fuel costs, and the increasing costs of day-to-day life have added to the financial woes of those already staggering under the weight of debt. With the number of people looking for help in managing their debt, it was almost inevitable that credit counseling scams and frauds would spring up throughout the nation. Credit counseling can be a great step towards regaining fiscal health, if step are taken to avoid being victimized by today’s opportunists. Become an informed consumer.
Do You Really Need Credit Counseling?
The first thing to decide is whether or not credit counseling is really necessary to bringing your financial situation under control. According to the Federal Trade Commission , much of what a legitimate credit counseling agency can do for you, you can do for yourself . The once per year free credit report that each of the credit reporting agencies is obligated to provide if requested can serve as a great starting point for your efforts to take a proactive approach towards resolving your debt situation and repairing your credit.
Once you have your credit report information in hand, you’ll want to make sure that there are no errors, such as a debt that has been resolved, but is still on your report as outstanding, or debts that do not belong to you. Any mistakes or disputes should be taken up with the credit reporting agency that has provided the information.
After establishing the extent of the debts and to whom they are owed, you are just as capable as a credit counseling agency of calling creditors to negotiate a repayment schedule and perhaps a reduction of the amount owed in interest. Some creditors may even be willing to negotiate on the principle of the amount owed, agreeing to accept a certain number of cents on the dollar, happy to get most of the outstanding amount, rather than none of it.
More Complex Situations Can Benefit From Credit Counseling
There are, however, some financial situations that are more complex than others, and in these circumstances, professional credit counseling can be very helpful. After all, they do deal with these types of financial situations on a day-to-day basis and have the expertise to help unravel financial complexities and help to create a simplified game plan to manage debt and, eventually, eliminate it.
For some circumstances, it may be enough to lay it all out and prioritize outstanding debts and living expenses, creating a budget and a plan. In other situations, the right move may be to consolidate debt . This can be advantageous if the interest on the debt consolidation loan is less than that of the debts that will be paid with it, which is often the case with high, double digit credit card debt. An overwhelmed consumer may feel much better – and, thus, be able to be more effective overall in reducing debt – with all debts gathered together into a simple monthly payment or two.
Choose Your Credit Counseling Agency Well To Avoid Fraud
If credit counseling seems to be the best solution, become an informed consumer before entering into any credit counseling arrangement. Trusting the wrong agency, one that is illegitimate and operating outside of the law, can result in making the problem a great deal worse than it already is.
You need to understand what a credit counseling agency can do for you. Those ads claiming to make debt go away, to be able to erase a bad credit history from your record permanently, or to be able to create a whole new credit history are often lures put out there by scam artists and people engaging in fraud. Legal, legitimate means simply are not going to achieve those ends. The consumer often ends up scammed out of fees and time, which they could have better spent on legitimate help.
A legitimate credit counseling agency will help you to reorganize your financial life and manage your debts . There are many non-profit organizations designed specifically for this purpose. Beware, however, and recognize that just because a particular agency advertises itself as being a non-profit doesn’t mean that it is trustworthy . Before working with any credit counseling agency, signing documents, or paying fees, make sure that you check with your state and local agencies, as well as the Better Business Bureau, making sure that there have been no complains or actions against the credit counseling agency you are considering.
Credit counseling can offer the consumer a way to effectively manage debt while reducing the stress and pressure of mounting bills and an increasing burden of debt. However, as current economic conditions have caused more people to struggle to manage debt, there has been a corresponding growth in the number of people looking to take advantage of those who may be more vulnerable to what may seem like an easy way out. Becoming an informed consumer is the best way to avoid being victimized by credit counseling scams.
Do You Really Need Credit Counseling?
The first thing to decide is whether or not credit counseling is really necessary to bringing your financial situation under control. According to the Federal Trade Commission , much of what a legitimate credit counseling agency can do for you, you can do for yourself . The once per year free credit report that each of the credit reporting agencies is obligated to provide if requested can serve as a great starting point for your efforts to take a proactive approach towards resolving your debt situation and repairing your credit.
Once you have your credit report information in hand, you’ll want to make sure that there are no errors, such as a debt that has been resolved, but is still on your report as outstanding, or debts that do not belong to you. Any mistakes or disputes should be taken up with the credit reporting agency that has provided the information.
After establishing the extent of the debts and to whom they are owed, you are just as capable as a credit counseling agency of calling creditors to negotiate a repayment schedule and perhaps a reduction of the amount owed in interest. Some creditors may even be willing to negotiate on the principle of the amount owed, agreeing to accept a certain number of cents on the dollar, happy to get most of the outstanding amount, rather than none of it.
More Complex Situations Can Benefit From Credit Counseling
There are, however, some financial situations that are more complex than others, and in these circumstances, professional credit counseling can be very helpful. After all, they do deal with these types of financial situations on a day-to-day basis and have the expertise to help unravel financial complexities and help to create a simplified game plan to manage debt and, eventually, eliminate it.
For some circumstances, it may be enough to lay it all out and prioritize outstanding debts and living expenses, creating a budget and a plan. In other situations, the right move may be to consolidate debt . This can be advantageous if the interest on the debt consolidation loan is less than that of the debts that will be paid with it, which is often the case with high, double digit credit card debt. An overwhelmed consumer may feel much better – and, thus, be able to be more effective overall in reducing debt – with all debts gathered together into a simple monthly payment or two.
Choose Your Credit Counseling Agency Well To Avoid Fraud
If credit counseling seems to be the best solution, become an informed consumer before entering into any credit counseling arrangement. Trusting the wrong agency, one that is illegitimate and operating outside of the law, can result in making the problem a great deal worse than it already is.
You need to understand what a credit counseling agency can do for you. Those ads claiming to make debt go away, to be able to erase a bad credit history from your record permanently, or to be able to create a whole new credit history are often lures put out there by scam artists and people engaging in fraud. Legal, legitimate means simply are not going to achieve those ends. The consumer often ends up scammed out of fees and time, which they could have better spent on legitimate help.
A legitimate credit counseling agency will help you to reorganize your financial life and manage your debts . There are many non-profit organizations designed specifically for this purpose. Beware, however, and recognize that just because a particular agency advertises itself as being a non-profit doesn’t mean that it is trustworthy . Before working with any credit counseling agency, signing documents, or paying fees, make sure that you check with your state and local agencies, as well as the Better Business Bureau, making sure that there have been no complains or actions against the credit counseling agency you are considering.
Credit counseling can offer the consumer a way to effectively manage debt while reducing the stress and pressure of mounting bills and an increasing burden of debt. However, as current economic conditions have caused more people to struggle to manage debt, there has been a corresponding growth in the number of people looking to take advantage of those who may be more vulnerable to what may seem like an easy way out. Becoming an informed consumer is the best way to avoid being victimized by credit counseling scams.
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