Saturday, December 6, 2008

Credit Counseling for Credit Repair?

Yeah, uh huh, and they're non-profit too! Too many credit counseling agencies or companies make such huge claims about improving your credit, it just sounds too good to be true. Guess what? Usually it is! Why? Because credit counseling or debt negotiation doesn't repair your credit, it helps you pay off your debt. Some of them say they help you pay off your debt, but in reality, they are just padding their pockets with your hard earned cash. Plus, if you can't keep up their payment plan, well, some of them report you to the credit bureaus too! Wow, that's just what you need.

They love being able to claim they are non-profit. But, what does that really mean? Well, first they have to incorporate and apply for the non-profit status. They can form as a non-profit or not-for-profit corporation because they are service oriented and provide education. They can even apply for a tax exempt status at both the state and federal levels. It looks so good to consumers - they must really care!

So you think they really want to help you because they are non-profit? Come on now, think. Why on earth would there be sooooo many credit counseling and debt negotiation companies out there if they weren't making a profit? They don't like to call it "profit", nope, it's considered a "surplus!" I guess that's why the top dogs get paid so much!

So, how does negotiating or counseling repair or improve your credit? It doesn't! Remember, once a bad trade line, always a bad trade line, unless you remove the negative notations. Sure, you may be able to use their plan to repay your debt, but you still have all the recorded late pays on your credit, the collection accounts will still be there, and some creditors will even add a comment that you are in a replayment plan on your report.

The good part about credit counseling and debt negotiation is that if you are successful with it your debts will get paid off. Paying off your debts helps you look more responsible to potential creditors. So, some may consider granting you some credit to help rebuild your credit profile and score.

Here's some bad things about credit counseling and debt negotiation.
  • You have to pay an additional fee to them - more money out of your pocket.
  • You still have negative marks on your credit and it confirms with the bureaus that the debt is indeed yours.
  • You are paying someone a lot of money for negotiating the same terms you could reach by calling your creditors yourself. A couple phone calls, sign some paperwork, there you go!
  • Some companies take your money but don't make your payments on time. Ouch!
  • Some want to auto draft your account and may take more than what you have to give them some months.
  • Some will report you to the bureaus if you can't keep up the payment plan.
  • If you think they are doing it because they care about you, get real. They are in it for the money - YOUR money!
Obviously I'm not a big fan of these services. I don't condone blowing off your creditors and not paying them, but I'm a huge fan of State's Statutes of Limitations, FCRA, FDCPA, FACTA, and FCBA. I never advocate paying off a collector, except as a absolute necessity of obtaining a much needed loan and it is a requirement of the lender. Rather, I prefer validation for collectors and if you are very near or past the statute of limitations, dispute, dispute, dispute!

Don't pay what they can't prove you owe, if they are not the original creditor! I have seen so many credit reports over the years and one thing is consistent - every single one of them had errors on them! When you need to pay old debts, make sure that it is actually the amount you owe. Make sure that they delete the negative information or the whole negative tradeline when they receive payment. The older the debt, the less damaging it is to your credit report.

My advice when it comes to paying off your debts in conjunction with credit repair, first check the date of last activity and compare that timeline against your state's statute of limitations. Next, contact your original creditor and try to make a deal with them for a reduced payoff and positive credit reporting. If the debt is with collectors, send them a validation demand. Don't give them a dime until they legally and completely prove that the amount they say you owe and the account they are claiming belongs to you is 100% accurate. Then, negotiate a lower amount with a promise to delete the negative tradeline - IN WRITING - prior to you sending them any money. Always pay with a money order and DO NOT SIGN YOUR NAME! Type or print only.

1 comment:

  1. This is great info. You need to post more.


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