You've watched the TV commercials, heard the radio ads, saw the web banners and SPAM in your e-mail:
"LOWER your interest rates and payments!"
"Combine your bills into ONE LOW monthly payment!"
"We can eliminate up to 60% of your debt through negotiations!"
Who are those outfits and WHAT will you get?
They promise to reduce your debts and payments, often hyping their non profit status. The non profits are usually funded by the finance industry, the goal is to reduce bankruptcies. Creditors don't want the debts discharged, they rather forgive some interest and fees and collect whatever they can.
I also reviewed some of the contracts for debt negotiators and I was appalled by the outrageous fees charged to the people who would often qualify to discharge their entire unsecured debt through bankruptcy for just a few hundred dollars.
November 4, 2001 Washington Post article:
Easing the Credit Crunch?
AmeriDebt Is One of a Breed Of New Debt-Counseling Firms Whose Business Practices Are Drawing Regulators' Attention
"When his creditors didn't receive that month's payments, Reed said, he was charged late fees, over-the-limit penalties and higher interest rates. "My credit had been absolutely spotless, but now it's ruined," he said."
Paying off your debts will most likely NOT save your credit rating
Bankruptcy is often referred to as the "10 year mistake" by many of these debt negotiating and credit counseling companies.
Of course bankruptcy lowers your credit scores significantly for a few years. However, the credit counseling notation found on many credit reports for people who thought they were doing the "right thing" by paying back almost their entire debt can be worse than the bankruptcy.
Some people are lucky and those notations go away once the accounts are paid off. Unfortunately you can also end up with credit such as the scanned Equifax report below:
- "Consumer Credit Counseling" -- rated similar to bankruptcy
- "30 (or 60) days past due x times" -- LATE payments, while the consumer made EVERY payment on time
- "Pays 61-90 days" -- while the consumer made EVERY payment on time
- "Account closed by credit grantor" - often consumers have to close all accounts when entering the program
FACT: Your credit rating is most likely BETTER 2 years after discharging your debts than 3 years after entering a payment plan.
Yes, there WILL be creditors who won't offer you credit with a bankruptcy, even after several years. BUT, why would you need that credit?
Why would you even WANT a Home Depot charge card with a 20% interest rate when you have $$$$$ in the bank? Remember that when you discharge your debts, you then can start SAVING your money.
So, BEFORE you enter a repayment plan, you MUST get in writing that NO derogatory data will be placed on your credit reports as long as you make your payments on time. Should you find a company who is willing to do that, PLEASE post in the forum or fax that statement to me at (571) 222-1000.
........ read all from the source : bayhouse http://www.bayhouse.com/credit-counseling.shtml
