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Credit Counseling Companies:

Date: Tue, 04/26/2005 - 05:38
Submitted by Pammila on Tue, 04/26/2005 - 05:38
Posts: 112
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By all means first try calling your creditors to negotiate for hardship programs and reduced interest rates.

If you so choose to go with a CCCS programs, then be aware of these possiblities and cover yourself in the event that something goes wrong.

Read your contract - and understand penalties for not completing the programs, and that sometimes creditors can be hard to deal with should you try and remove your self later from the program. Always best to consult your creditors first and ask what can be done let them know what you are having problems with should you have to consider backing out later.
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  • Call the creditor to verify the interest rates which the company claims to have negotiated for you.

  • Ask the company what time of the month they intend to forward your payments to the creditors and if this happens to fall past a due day of any of your creditors. Then you need to call the creditor and make them aware that you need to change your due date with them.

  • If the company wants you have your creditors re-direct sending your billing statements to them, instead set up duplicate billing - so if they fail to pay your creditor on time, you will at least find out of it the following statement. Be sure that should this happen you want to make alternate payment arrangements immediately to catch the account up - and ask the creditor for good will not to penalize you by defaulting your interest rate because of the this incedent resulting on the part of the CCCS company.

  • Understand that when starting out these companies most likely will require a first month fee; and won't start paying your creditors until there fee is met in full first. So be prepared to pay double starting out just so you don't result in defaulting the negotiated agreements with the creditors.

  • Yes, some creditors will notate on your credit report that the accounts are currently in debt counseling; and in addition will require that the account is closed.

  • Yes, this is considered just as negative as bankruptcy 13 listings on the credit report. But this is better then defaulting on the accounts because you showed responsibility in taking care of the debt in the end.


    What I would do, when credit card debt is high; is make a list of what companies need to be paid each month. In order of interest rates (not balances).

    Exception to this rule is if you currently have any balances over the credit limit, if that is the case pay minimum on all other card and all of the over the limit balance plus $50 to get below the credit limit on the one!

    Want damage control as soon as possible in these cases, since interest is defaulted to higher rate and over the limit fees are added (this will get away from you fast if you don't get it back below the credit limit).

    On the highest interest cards pay minimum payments on all but the highest interest rate card, double if at all possible the minimum payment on this account.

    Also make note of what available credit is on the other cards; and do partial balance transfers of the highest interest rate card over to these smaller ones (be sure to read your policy on both cards to know of fees and such). To decide if this will be beneficial to go ahead and transfer.

    Remember you can not balance transfer between affiliated card companies...

    This is a slow route to go, but keep your chin up, it is the best way that I know of to rehabilitate this situation. Recommend that you leave the account open; and do so for a period of time for it to help the credit scores increase later as a result of the balance / credit limit ratios decreasing. Don't use it again just put it away until later.

    Once you have this completed move to the next card (with the highest interest rate) doing the same exact thing; paying minimum on all others and double on the one (and if possible balance transfer partial balances over to the lower interest rate cards)...again leave this account open, don't use but put away somewhere safe for the time being.

    And it may even be that towards the end prior to paying off, your scores might improve enough; to apply for an even lower interest installment loan with local bank or credit union, to transfer debt over.

    Periodically as you pay down, keep calling the creditors to review your account; and see if they will lower interest rates for you; or re-age the account (which means they would wipe the slate clean of negative reporting) like lates incurred and revert back to positive reporting. Not all credit card companies offer re-aging; but with a try to ask on this part.

    It is a good practice to get into using installment loans; they are a sound financial decision which at the same time, does not tempt responding like revolving accounts do. And also at the same time you are developing good solid relationship with these banks & credit unions that you can fall back on later when need be.

    With this method; you take control back, and the creditor is not going to necessarily force you to close the accounts as would be required with the CCCS program. (which would further hurt your credit). The idea is to over come but at the same time, rebuild instead of destroy like so many other means out there can do to the credit.

    Also recommend highly that you take a class with the local college on personal finances; to empower yourself further to get back on track and be more financially minded to apply and use the best type of credit the best way possible.

    When all is said and done then go back to the credit cards which you have and consider these things:
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  • Long established History
  • High Credit Limit
  • If the account is positively reporting (no lates..collections...charge offs)
  • And over all satisfaction with the Creditor.
  • Also, if these cards are able to cover purchases anywhere (not department store cards).

    These are the cards to keep (should limit your choices to 3 or 4) and Close the rest!

    Also, you might consider asking good will of the creditor if they would review your account and having proved your worth for them to remove late listings and the such on the credit report.

    This is so important to ask for since it affects your ability to establish and maintain good interest rates with the other creditors out there that would periodically review your reports (and as a result might increase your interest rates with them). unfortunately.

    Best of wishes,


    • Hi Pammila,
    So according to you is contacting the creditors directly a better option rather than going through debt consolidation or settlement companies?
    Is everyone equipped to contact creditors directly?
    Will appreciate if you can clarify this point.
    Mike


    Submitted by Mike on Thu, 05/05/2005 - 07:54

    Mike

    ( Posts: 1317 | Credits: )


    Not everyone is going to be up to contacting the creditors directly. I do acknowledge that some people want someone else to take care of the details for them. And if they rather have a credit counseling company work for them, then they need to make sure to check references first, and ask some important questions on when checks are sent out to creditors make sure everyone is on the same page, and get duplicate billing statements so they can keep up and make sure all payments are received by the creditor on time. Also get confirmation from each creditor that reduced interest rate was accepted, just call and check to insure everything is in place as was presented to them.

    Settlement companies are a different matter, I can't say that I have heard one consumer report positive experiences with them. I know it would be hard for the consumer to get the confidence, and research to feel comfortable making their own settlement offers, but I think in the long run it is in their best interest to do so.

    Don't feel rushed, if accounts are already charged off, they are not going any where, time is then on the consumers side, the older the account becomes the less the creditor or collection agency will be apt to accept for payment.

    Be sure of each step that you take in negotiating with the creditor or collection agency - get everything in writing.

    If the creditor files for a judgment, then make sure that the debt is validated, if not by then ask the court for discovery and also check collection agency licensing for that state, and check on the SOL for that debt if it is time barred.

    Each state has laws on how much money can be garnished, and it is sure to be less then what a collection agency is trying to get out of you before judgment is filed. So if a creditor is not willing to negotiate let them file the judgment, they will get less.

    You can come back and negotiate dismissal of a judgment, so damage control, can be taken at any stage of the debt status.

    Regular charge off and collection accounts can be negotiated payment for deletion. Or even if that don't work, the consumer can try disputing the debt off of the credit report with the credit reporting agency, if they can find reporting errors, or some other technical reporting problem to work to their advantage.

    There is always options, it is not always as bad as it looks, there is time for everything. Just a matter of researching, knowledge is power.


    Submitted by Pammila on Thu, 05/05/2005 - 14:50

    Pammila

    ( Posts: 112 | Credits: )


    Thanks for the clarification and your tireless participation in the forum Pammila. :D

    Take care,
    Jason


    Submitted by Jason on Thu, 05/05/2005 - 22:51

    Jason

    ( Posts: 2430 | Credits: )