Facts consumers should know before considering Credit Counseling or debt consolidation
Of course, the hate mail is always a few people who happen to own these "certain types" of businesses and I talked, of course, Credit Counseling Companies or companies debt consolidation, which many "claim" for nonprofit organizations.
You almost have to be an ostrich with its head stuck in the sand to not see or hear at least one ad per day of a credit counseling or debt consolidation company. However, you can expect this change and change soon. Since this is an issue that tends to "wake up" to the owners of these businesses, I am going to take a different approach by not sharing my opinion but rather, the opinion of others. I'll start with the media and the Internal Revenue Service:
"(NPR News, May 15, 2006). The Service Internal Revenue's revocation of tax-exempt status of some of the largest Credit Counseling Agencies in the country. An investigation revealed companies claimed that the IRS business people seriously in debt and do not provide counseling or consumer education, as needed.
Stimulated in part by an oversight committee of Congress and consumer advocates, the IRS began investigating dozens of credit counseling agencies – most operating non-profit status – two years ago. IRS Commissioner Mark Everson says the companies "poisoned an entire sector of the charitable community."
Everson says in many cases, companies were organized merely to funnel business to loosely affiliated non-profit companies. Many companies spend millions dollars on ads that urge anyone with debt to call to solve your financial problems. And because tax-exempt organizations are not bound by the federal government waiting list, companies were able to call consumers at random, releasing its services under the guise of a consulting service nonprofit.
The IRS investigations are also likely to affect consumers, thanks to a new bankruptcy law that requires consumers considering bankruptcy For counseling before being allowed to present. The IRS wants to ensure that only legitimate agencies, non-profit are doing the counseling. Also of the actions announced Monday, the IRS is sending more than 700 letters in accordance with the rest of the Credit Counseling Industry (END). "
Since almost all companies and Credit Counseling Debt Consolidation a claim nonprofit status, I feel most consumers are easily absorbed with their skepticism and defenses at bay. After all, when most of us hear the word "nonprofit" the first thing we usually think of a church or homeless shelter.
Based on the NPR article and the actions of the IRS, I think it is fair to assume that many of these "nonprofit" organizations have been operating under a similar situation to that of a wolf guarding a hen house. However, this does not mean all credit counseling companies and bad debt consolidation but … you do not need to know the truth about how they operate and their limitations.
The first thing you want to understand is that these companies are all more interested in making money from you than they are in preserving your credit. The bottom line with credit counseling or debt consolidation is that absolutely ruin your credit. I can only hear the companies arguing this with a consumer at this time, telling them nonsense like "It helps credit since it tells creditors that you are working in your situation and not just away from him. "Listen … if one of these places that says to be careful. Why? Because he sleeps with you about other things too!
One of the first actions these programs usually requires you to do is to to close all revolving credit accounts. Then make payments to the organization and take care of everything for you. What this says to all your creditors (and as anyone who believes that giving credit) is that you are so out of control with their finances can not even manage paying everyone back on their own. As So, you're hiring someone to do it for you!
99% of the time, these companies claim they can negotiate with your creditors and see interest rates reduced and thus save money. While this is true, what is also true is that you can negotiate these same rates, as can just call your creditors yourself same. You'd be surprised how many of your creditors would love to hear from you (especially when the chips are down!). Not too mention, any money business advice to save you more than likely be sucked back through their monthly fees (usually about $ 500 to $ 1,000 per year).
This takes us on a whole other dynamic of their business model. Because these companies always make their money on monthly fees paid by the consumer, the longer they can keep those monthly fees from its most profitable business is. It is for this reason that most consumers who sign contracts with these companies usually found on payment plans with lower monthly payment possible (which also happens to be the LONGEST payment plan as well.) Not surprisingly it is?
Am I against Credit Counseling and debt consolidation companies? Of course not. After all, millions of people in America will never be able to to manage their finances. Thanks to them is a destructive addiction much like alcohol or drugs and never will be able to control it. Instead, always control them. We've all seen these people. Each time you extend credit shortly after they are in financial trouble (usually because of some external factor). For these people, I believe that these credit programs and debt counseling can be a good thing (as a ruined credit report is not an obstacle for them, but in reality an asset). This keeps them out of future financial problems, forcing them to live their lives in a box "and perform" core, which is ultimately leads to a better quality of life on the road.
On the other hand. If you are good with their finances and have control with credit but went through some kind of difficulties beyond their control in the past (ie divorce, job loss, etc.), then the services of these companies will never be for you. You'll do much better and maintain your credit rating by taking matters into their own hands. The reason being is that you understand your credit score is a powerful tool that can help you move faster, help others and help yourself and create the life you want. It comes down to self-management. We all know that can not be handled will ultimately be managed by others. Credit is no different. When you learn to manage it well, you are the master and servant.
If you concerned about their credit and want to benefit from it in the future, then you will never trust a credit counseling service or debt to help you quit any problems you encounter entry, but you look inward and get yourself out keeping your credit score best. Credit and advice Debt is for people who are "ok" with launch of its credit rating in the trash so they can have "someone else" manage their payments for them (since they are unable to manage by itself). And again, as far as negotiating interest rates, you can do as good as them or better. If you do not believe me just call any of your creditors and tell out his situation. You will quickly find that there is no need to fear them. They only want to get paid like the rest of us.
About the Author
Jay Peters is the founder of Consumer Education Group which publishes the Credit Secrets Bible (in print since 1994). To receive Free Credit Tips including “how to get your credit reports for free” visit their website: http://www.TruthAboutCreditRepair.com
For media inquiries or interviews Jay may be contacted at (928) 848-1400 or email: JayPetersOnline@yahoo.com
Related Blogs
Related Blogs
- Related Blogs on Credit Counsel
