Has anyone ever used one of those Debt Consolidation services? A friend of mine got herself into some credit card trouble, and is having a hard time paying her bills. I have seen a few companies advertised, and I also know some are non-profit, but I have no idea how they work, and would really like to help her make an informed decision on how to proceed. Do they screw up your credit? Is it like going bankrupt? Any that she should stay away from? Any help would be appreciated.
Thank 
Rose
I’d be very careful about doing this.
Even a ‘non-profit’ organisation has bills to pay.
For sure there are companies that prey on people expecting a ‘miracle cure’ for debt. OK, they might offer to ‘consolidate’ all your debts into one package. But frequently the new rate of interest is higher.
The only way out of debt is to pay it off. That means spending less (including interest) than you earn.
I know it sounds obvious - but how did you get into debt in the first place?! 
.
Sit down with a piece of paper (or one of those new-fangled computers) and work out how much you earn.
New column - how much you spend.
Keep bills for a while to help you do this. Look at your bank statement.
You may have to cut down on something to balance the books.
Remember that if you can restrain yourself, it’s much cheaper to buy something out of savings (that earn you interest 
), than to buy on credit and pay loads of interest to someone else.
Good luck.
Oh, and since I managed to build up some savings, my bank keeps offering me loans.
When you’ve got money, it’s easy to get more!
A few years ago, I went through a “credit councelling service”. The way it worked was that after you take all your bills to them, and proof of your income, they figure out a budget for you. They contact all of your creditors. They arrange for a specified amount, usually a lot less than the normal payment. Most of the creditors will drop or reduce the interest. You take a specified amount of money to them every month and they make the payments for you. In my case, the amount I took in to them was about half what the full payments would have been.
Credit counceling services are not for everybody, and in some cases they can’t help a person. For instance, I have been to the same one twice. (I didn’t learn the first time. 
) The second time, I had too many bills that had too high of payments, and didn’t make enough money, so I had to file bankruptcy (sp?), unfortunately.
If it is at all possible, DO NOT file bankruptcy. The year I did it was 1985. I am still not able to get good credit. The only kind of loan that I qualify for is one with 30+ % interest.
On a side note, also, don’t go out and get a “debt consolidation loan”. Trust me, they don’t work either. 
Yes, I’ve been there and done that to.
Incidently, the way these services pay their bills is from contributions from business. After all, it is the business that wants their money paid back, so they help fund these places, in exchange for the help they provide the consumer.
If in doubt about the operational practices of a certain service, contact the BBB and ask them.
One last thing, stay away from “credit repair” outfits. The only one that can repair your credit is you.
Hope this rather long winded post helps.
I’ve recently been warned about such services by a mortgage banker (not that I’m in need of debt consolidation, just that I’ve been shopping for a mortgage). Debt consolidation services are reportedly lethal to your credit standing.
They usually convince your debtors to take losses on all of your debts, using the logic that it’s better to get some payment than none at all. It avoids actual bankruptcy, but the losses are still reported to the major credit bureaus.
At least that’s what I’ve been told by a mortgage banker. Try negotiating with your debtors directly, seeing if you can arrange a payment schedule which keeps the debt from being written off as a lump-sum loss.
OrcaChow
From what I understand, you’re right about that. Going through a debt consolidation or credit counseling service can be as hard on your credit report as a bankruptcy. As far as the creditors are concerned in either case, you didn’t live up to the credit agreement you signed.
As someone who works with credit reports, I can tell you.
This is known as a “charge off.” The company agrees to settle for less and then puts the amount forfeited on your credit history as a “charge off.” It is NOT GOOD.
Contact the companies directly, tell them your story, and agree to pay so much each month. They will put “30 days late” or whatever on your credit, but it is not as bad as reporting that they lost money.