I want to try CCC to bring down my debt. They worked out a plan where I can be debt free in five years. They consolidate my bills into one and I will only be making one payment. They require that my all my accounts be closed. Is this a good idea? Will this hurt my FICO score which is pretty low 540? Please help. Has any one tryed them?
In general they aren't the best idea mainly because 90% of them out there are scams and don't do much for you that you couldn't do yourself. But they are some that are reputable. So as the Apple suggested, if it way beyond your control and you can't do this yourself, search very dligently for the very few good ones out there. If any say let your bills go to collection first and we'll work out a settlement for less, THEN RUN, these are the types that can destroy you financially. Not all are bad.
but if you think you can do this on your own, and more than likely you can, there are many fourmus and DIY's books our there to guide you.
I have 3 accounts enrolled in one as we speak. For a few months I could not make payments and by the time I was able to, my minimum payments were through the roof! And one account was even in collections....yikes! They worked out a plan to pay it off in 4.5 years. I've been in it for 25 or 26 months now, no lates and my balances are going down.
However.....infact big HOWEVER!
Couple things you should know before you enroll.
1) I would talk to you CC companies to find out the status of your accounts before you enroll i.e. how late, charged off, collections etc.
2) Try to work directly with them first because you may get a good deal with them if you explain your circumstances
3) MAKE SURE the CCS is reputable, don't go with anyone who does not have a good rep. do your research
4) Watch their fees, some try to get over on you. I pay $10 per month which to me isn't bad because direct debit from my bank account and forward payements and as I said before they always arrive on time.
5) Keep in mind that they may not be able to stop collections, chargeoffs, lawsuits etc. Which is why I said you should know exactly the status of your accounts before you enroll them
6) I did not close my accounts. That is sucky advice, IMHO. Well, 2 of them I had closed long before I started the DMP, but the other one is open and I intend to leave it so. Some CC companies will automatically close the account once you're enrolled in a DMP anyways. Some won't some will. I say if you can leave it open, then leave it open, the CCS does not have to know.
7) Be mindful that some companies will state on your credit report that your account is being managed by a DMP. While that is supposed to be neutral, I can tell you, because I used to work for a car dealership, they do not look favourably on you being in a DMP. So if you're planning on buying a car, watch that. I can't say how other lenders view it.
8) If you do enroll, read every line of that agreement, TWICE! And the proposal that they said the creditors agreed to....double check that, triple check it. I have one account that was charged off and although my agreement says the creditor agreed to re-age the account, they did not. And I have no idea how to deal with that, but that's another story for another time. You just call your creditors and verify that they agreed to the terms you have in your proposal docs.
Overall you have to match the DMP with your needs. If you can do it on your own, do it on your own. As I said there was no way I would have survived mimimum payments that were thousands of dollars. And although I do have some gripes, namely the charged off account, I am happy to see my balances going down drastically and I plan to be out of the program in the next few months.
The advice here about doing it yourself is great advice. My husband and I both had experience with this type of agency and we both had our payments to arrive late to the creditors. I had to go as far as to have a 100 word explanation added to my credit reports stating I withdrew my membership with XYZ Debt Management Company because my payments were being paid late!
The debt company had a cut-off date whereby they needed our check to pay our debts. The check would arrive, but because it arrived in the P.M. of the due date, instead of in the A.M., it was too late to pay our bills for that month!! It was a nightmare! We started sending the payment in a few days earlier and then there was another problem with the bookkeeper applying the payment to the wrong account, blah, blah, blah.....always something that was delaying our payments. It didn't happen every month, but it happened enough for us to get frustrated!! Some of the creditors were okay with a debt management company being used, but others looked at it as being a bad thing and Sears canceled us after we paid off our account with them.
Call and talk to your creditors. Pay on time what you agree to and just don't get behind. Things will work out well for you. It will just take time and patience and a dedication to get out of debt.
We have since remodeled our home and purchased a car and now we have debt again. However, the rates are low and I am instrumenting the same plan that we had before. We used Quicken's Debt Reduction Planner before and now we're using it again. Buying the Quicken software was much cheaper than paying the monthly fee for debt counselors AND stay tuned to the FICO forums here because this is a place where good advice is being given. People here aren't judgmental and willing to help you out no matter what your problem is.