What problems are involved with using these “Credit Card Debt Reduction Services”?
I see a lot of advertisement from companies that claim they can reduce your credit card debt by 40% to 60%. What is the down side to using them? If they are successfull does it effect your credit rating? What do they charge? What must your situation be for them to be able to be successfull, Broke?
January 22nd, 2010 at 12:33 am
Your credit score will suffer immensely. This should be looked at as a LAST RESORT only. Even if you have to cash in your 401K, do it before you even think of using a credit debt reduction company.
January 22nd, 2010 at 1:03 am
my mom used consumer credit counseling services like 20 yrs ago and she tried to get something like 15 yrs ago and they saw that she used them and it ruined her credit forever!!
January 22nd, 2010 at 2:11 am
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January 22nd, 2010 at 2:20 am
Don’t pay someone for something you can totally and completely do yourself!
1. Order your credit reports from the 3 bureaus
http://www.equifax.com
http://www.experian.com
http://www.transunion.com
If you’re ordering for the first time, get your score (for a fee) from Equifax as their scoring matters most.
2. Make copies of your report and put the originals in a binder. On the photocopied reports use a highlighter and check for any incorrect, outdate, false, etc…info
3. Download a dispute letter(s) from the credit bureaus website and list anything that is wrong. Mail them to their office(s). They have 30 days to reply.
4. If they will not remove something that is not yours or too old (> 7 years) as them for a debt validation. This may take an additional 30 days.
5. Once the ‘baddies’ come off, take care not to let any of your other accounts fall into that predicament.
6. If you haven’t already make sure your existing accounts are current and paid on time ALWAYS.
7. Get a secured credit card with http://www.capitalone.com or http://www.mastercard.com for like $500-1000 or more if you can and use it sparingly. Charge like $50 on the card each month and pay it in FULL and on TIME. Make sure you do this for a minimum of 6 months so that you estabish a positive repayment history.
8. Problem with just letting them (collections) ‘fall off’ is that they may never. You may get sued before that…that’s where you suddenly get a summons to appear in court and a judgment for collection against you.
For collection items…pay them but get a ‘pay for delete’ from the collection agency in WRITING…they’ll delete it after you pay and it will help your credit score.
January 22nd, 2010 at 3:21 am
Why would you pay a company to do the exact same thing you can do yourself for free? All they do is call the credit card company and negotiate a lower interest rate…it is something you can do on your own.
January 22nd, 2010 at 4:58 am
Debt-settlement companies promise that you can get out of your debts for pennies on the dollar. Typically, these outfits demand that you stop paying your creditors and instead send the money to them. After a few months, the debt-settlement company promises to open negotiations with your lenders and use the money you’ve sent to pay them.
The idea is that after a few months of not getting paid, your creditors will agree to a fraction of what they’re owed.
Of course, your credit will be trashed at this point, you’ll have paid fat fees to the debt-settlement company, and you may be facing lawsuits from your lenders. That’s if you’re lucky. If you’re not, you’ll risk all this, and the debt-settlement company will disappear with your money. If you need more details, read “Debt settlement: A costly escape.”
Better alternatives include:
* Credit counselling. Legitimate credit counsellors have debt-management plans that reduce or eliminate the interest rates on your credit card debt.
* Bankruptcy. If you can’t pay your debts, you may be better off getting a fresh start through bankruptcy. Your credit rating may recover more quickly, and you’ll be able to keep the cash you would have otherwise sent to the debt-settlement company. Consult an experienced bankruptcy attorney who can evaluate your situation and discuss your options
January 22nd, 2010 at 6:43 am
I actually was just reading that at mastercard.com.
It depends on your credit card, but most times, it will show a little bit on your credit score by using the credit card debt reduction services, not like filing for bankruptcy or anything. I’d say it’s a good idea all together. Mostly what they do is help you get your credit together without having to file bankruptcy.
January 22nd, 2010 at 10:16 am
DONT EVER USE THESE COMPANIES!
THEY TAKE YOU MONEY FOR MONTHS AND KEEP PROMISING YOU THEY ARE GOING TO START PAYING OFF YOUR DEBTS.
YOU LOOSE ALOT OF MONEY BECAUSE THEY TAKE OVER HALF OF THE MONEY.
ITS TRUE YOUR CREDIT SCORE WILL BE TRASH!~