Consolidated Credit Counseling Debt Consolidation
What are the positives and negatives of using a debt counseling company and consolidating my debt?
I have a tremendous amount of debt. I do not want to declare banruptcy but the monthly payments are too high for me to manage. I have contacted the credit card companies but they will not reduce the interest rate or negotiate until my account goes to collections.
My main concern is how this might affect my credit. Because debt consolidation companies negotiate a lower APR does this showup in any way on my credit or affect my score?
My credit is good right now and I would like to figure out a way to keep it that way while paying off my debt. Any advise would be appreciated. Thank you.
BE VERY CAREFUL…..There are tons of complaints against debt settlement firms.
Here is how most operate: You pay them around $500/month and keep paying this amount until a pool of money is saved up….In the interim, they DO NOT pay your bills and all your credit card accounts go past due by multiple months….This is no accident….It is a deliberate attempt to cause your accounts to go near (or total default) so that the debt settlement firm will be in a position to negotiate a settlement. They might be able to get a settlement in the 50% range.
You do not have to pay anyone to do this. It’s very easy to cause your account to default so you can negotiate a settlement….simply don’t pay your bills….You don’t have to pay anyone to do this for you….It’s free….If you are willing to wreck your credit rating for seven years….then debt settlement is for you. You can do this yourself without having to use a debt settlement firm. Be sure to get all terms IN WRITING about any settlements.
STAY AWAY from any debt counseling service you see advertised on TV or the Internet…..They all have feel-good ads but most are predators looking to take easy advantage of people who are having financial problems.
You can call your local Red Cross for a referral to the local CCCS in your area. CCCS does NOT negotiate settlements….They can often negotiate lower interest rates that consumers can’t.
FYI: If you enroll in a debt management service like CCCS, this will be noted on your credit report and you will NOT be getting any mortgages, car loans or credit cards during the duration of your enrollment in their service. Loan officers HATE to see this notation on credit reports.
IMPORTANT**** Settled debt can come back to haunt you in the form of higher taxes. The IRS considers forgiven debt to be in the same category as earned income….So, for example, if you manage to get $10K in debt forgiven/settled, you’re going to have to add $10K to your next year’s adjusted gross income and pay whatever additional taxes. Debt settlement firms almost NEVER inform you of this.
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