Should I use a Credit Counseling Service

[Anonymous]

I own a house that I rent out. I do credit checks on tenant candidates. I wound up going with 1 candidate who was in credit counseling and it showed on their credit report as CCCS or something. It also showed that there were missed payments recently. I mulled over the ethics of whether or not to mention that, but I figure, I needed to so I understood what was going on.

They said, "You must be mis-reading the report, I'm in counseling, my paycheck goes to them and they take care of everything. I can't be late."

I sighed, "I highly recommend you get a copy of your report yourself, and perhaps, make an appointment to talk with your agency."

Out of darn curiosity, I learned that these agencies are non-profits and her agency had been overwhelmed enough to miss payments for clients. Rent checks came from the tenant directly, so at least I didn't have to worry about the counseling service making my payments.

[Anonymous]

One of my clients for a home purchase had gone to a counseling service - only hers went bankrupt and the payments she made to them never reached the creditor - she had duplicates of  accounts, etc and it really trashed her credit. (She was one of the ones I told to fix her credit before buying)

I firmly believe that anything that they can do - you can do better by talking with creditors and negotiating lower APRs, etc.  They will usually work with someone who is willing to pay (and has a good reason for the debt) versus having it go unpaid or into bankruptcy.  It benefits them  - getting the money and your goodwill.  IF they did this would you not tell everyone how great a company they are?  So many companies forget the value of goodwill nowadays.

[demi]

Actually, I have paid off about 40 so far (interest still accrues!).  They do not get my paycheck, they take out $1257.00 on the first of each month and pay the accounts electronically as soon as it clears.  You can check who has been paid on the website, you get a statement each month.  Its been kind of fun to watch - once one is paid off, they usually assign the extra money to the highest interest accounty.  This week I called them and asked them to pay the remaining 3 that are small amounts so they would be paid off, hopefully increase my credit score that way.

As to weather I could qualify for a car loan, I didn't even try 2 years ago, too chicken...I paid cash.  Fortuneately, I was in a postition where I had just changed jobs after 20 years, so I had a pretty tidy sum in a deffered comp account which up to then I had not been able to touch.

But...I just prequalified for a house !!!!  My scores are 674, 676 and 684...it does show on some of the accounts within my credit report that I am in debt management, but I am not sure that is necessarily a bad thing - I think it shows that I took proactive steps.   Everything has been paid on time - only problem I ever had was the due date on one of the cards would move around near the date that they would pay them, so once the payment was missed...but they were already paying more than needed, so it was ok....but the solution was to change the due date.  The make you fax or send copies of the cc statements every six months so they can review.  I am sure there are plenty of problem debt management firms out there, but these people are on the up and up.

 I have posted in other threads that I firmly believe I owed this money - I was mainly "stuff" I bought with these cards.  Although I medical problems, those wer on top of what I had already done.  You are in a little different position.

I would give them a call...it was probably the hardest call I ever made, my stomach turns everytime I have to deal with credit stuff (I have been taking valium every night to sleep while the house goes thru!).  They are very helpful, and make a point of educating you in the program to help you keep from doing a repeat.

[Anonymous]

Hello,

I am very sorry to hear of your situation but I want you to know that I truly understand your situation. My husband was ill for a while and we accumulated close to $40K in debts. So, I have been in that exact situation you are in now. We eventually paid them off because we sold our house and had a large amount of equity to be able to pay them. In the end, it worked out because I found this site and we have been blessed enough to get most of the lates off of our report. That being said, my advice to you would be this:

Ask yourself if you have the capability to pay down the debt in a huge chunk. If not, you have to file bankruptcy because you will never pay off that type of debt. You can start rebuilding now and be good to go later later. If you struggle to pay the debt off, you will still be debt two years from now versus rebuilt.

Think about if you cannot pay the minimum payments now, you want to stop the debts from updating as 30's, 60's, and then eventually charge offs. If you take that step now, versus, later, while a bankruptcy reporting on your report is just that, I do think you may do less damage if you dont let the delinquent payments linger for months before you finally make the decision to do later what you can do now.

Last, I would caution you on using CCC. We did that same program in an attempt to help us. After paying 21 monthly payments of $1000, we were still in debt just as much as if we would have been if we had not used them. One thing I did not know was that CCC cannot negotiate your interest payments with ALL creditors. I have heard some stories where you still pay the high interest rate. Not all creditors will work with CCC and give you breaks. Sometimes, the only thing that changes is that you are in their program and the phone calls stop. Other than that, there was no benefit to having them. They did not advise us that we were not getting interest rate reductions until we were well into the program. If I had known that, I probably would have tried to negotiate a payment plan with the creditor because I did get dinged with a code on my report that I was in a debt management program. I eventually pulled us out of the program as we were able to come up with the money to pay the bills off.

In all, I would say think about your decision very carefully...if you cannot come up with a huge chunk to pay down/off the debts...you probably should just go ahead and start fresh and clean AFTER bankruptcy. Because honestly, you will never pay that debt off or if you do, it will take years upon years.

Best of luck to you and please keep us updated on your decision.

God bless.

[demi]

I agree with missy bell, there are a lot of debt management services out there that are there to make money, not to help.  Mine works great for me, -- yes it was discouraging to see the first year or so not much happening...but in retrospect it did a lot more than I could have done on my own.  Yes they did negotiate interest rates, and yes, in some cases they  couldn't get them lowered.  One of the two items I had in collection, Speigel, is next to impossible to even get a hold of.  But as time progressed, they do get paid down, a lot faster than if I had done.

Bankruptcy may be a better option for you...it wasn't for me.  All I am saying is check all your options out.

[marty56]

I just made my last DMP payment.  I was in the program for 4 1/2 years.  During that time I was able to buy a home.  The plan forced me to develop and stick to a budget.

My FCIO scores are now  TU:723 EQ:707 EX:729

The plan I used was http://www.40debts.com/counseling/default.asp

I want to buy a new car in the spring and I dont know how being in the DMP will affect my puchase.  I have history of 2 auto loans on my credit report with no late payments.

[Anonymous]

I am new to this forum and I don't know if you are still seeking advice on this issue, but I have been in a DMP for 7 years now.  I started out with just one card in the program and gradually added the rest 1 at a time so that I could get used to the higher payment gradually.  I have 2 more payments and I will have paid off over $40,000.00 in cc debt.  They have never been late making my payments and their fee is just $20 a month.  I receive my cc statements every month just as I normally would, and I also receive a statement from the DMP every month.  I know that 7 years is a long time, but if I was paying them at the at the old interest rates, I would probably still be paying on them for another 30 years.  The DMP lowered my interest rates to around 6%.  I went through Debt Free, their # is 1-800-997-2304.

On my credit report it just states that the acct. is closed at the credit granters request.  I have no late payments on my CR and my score is around 725 right now.  I have heard horror stories about DM companys though.  I have been lucky so far.  No problems and only 2 pmts. to go.