Looking at their site here, these people look legit. However, I know that people normally don’t do things because it makes them feel good. Where does this company make money on these people?
I ask because I’ve done that thing that college students do. In two years, I’ve racked up 7 credit cards, mostly store ones. I don’t need that many! But I hear that it’s bad to just close credit accounts, because it is bad for your credit to close credit accounts.
I know that most, if not all, of the things of the things that they do I could do myself, but I don’t have the self-control, or something, apparently. Also, if they can for real lower my interest rates, that would be nice.
The one Mr. SCL and I used is a non-profit agency - they were able to get the interest rates reduced so we could make reasonable payments. We paid the agency and the paid the creditors. The one catch was that we had to close all credit card accounts and couldn’t open any until we paid everything off. It was actually for the best - we don’t use credit cards at all anymore.
That’s good to know SCL, because I always kind of sneered at those commercials, knowing that the people who needed those services weren’t going to stop using credit cards. I’m glad to hear they actually force you to stop accumulating new debt until you are in the clear. Good for you guys by the way.
You have to be careful though. What some of those places do is call up your credit card people and basically say something to the extent of chaoticbear owes you $10,000. Now $10,000 will cause bankruptcy so what we would like to do is offer to pay $6,000 over 48 months. That’s $125 per month for the next four years and then we’ll call it even. So we’ll pay you that, or we declare bankruptcy and you get nothing. Assuming the CC company doesn’t call the bluff (or it isn’t one) they don’t have much of a choice.
This may seem like a great tactic, but it’s not real good for your credit. Even though the CC company agreed with the deal, you still didn’t pay them what you owed and your credit report will reflect that. Now I don’t know if CCC does that, but you have to be careful. You might be better off closing all the cards, figuring out what you owe them and taking out a loan in that amount and just paying one person instead of seven.
Some credit consolidation agencies are not on the ball when it comes to making your payments to the credit cards. They are supposed to send the money to your creditors for you, but some send late payments or skip them, effectively ruining your credit. If you go with a credit consolidation place make sure you still check that your original creditors are getting paid on time.
Going through a credit consolidation does show up on your credit report, and it is better than declaring bankruptcy but will still ruin your credit. You would probably be better off closing the accounts yourself (it will show up on your report as “closed by consumer request.” ) With a little time and better behavior in the future your credit will recover.
I don’t know who you applied for loans with but my husband had a similar situation to yours in college, and some of his accounts were already in collections. He applied for a loan from a credit union, he turned over his cards to them, they closed the accounts and wrote checks to pay them all off. Then he had auto payments taken out of his account every week as soon as his paychecks were direct deposited. You might be able to work out something like this, especially if you can get someone to co-sign for you. Credit Unions are often able to work more with you than traditional banks and taking out a loan from a credit union won’t hurt your credit, in fact, having the auto payment assured timely payback of the loan and was a step toward restoring his credit.
The small ding your credit score will take from requesting the cards closed is really the least of your worries. Do what it takes to get back on track and your credit will eventually recover.
We went through a true not-for profit company in Indianapolis (Momentive) to clear up my husband’s credit card debts. The website is www.momentive.org. They used to be Consumer Credit Counseling Services of Central Indiana, but got tired of being confused with the for-profit outfits around town. They reviewed our income and expenses and worked out a monthly dollar amount that we could afford. Then, they contacted the CC companies (four of 'em), and were able to get late and over-the-limit fees discontinued and interest rates dropped. Once a month for almost four years they direct debited $219 from our bank account. It wasn’t a loan or anything - just a consolidation service.
He just finished up a few months ago, and it feels really good! Now, it’s my turn.
When you go into credit counseling, it will show on your credit report and possible interfere with future loans and approvals for new accounts. Do not necessarily let this stop you from doing so, because it is definitely better than going bankrupt, which is why credit card companies go along with it.
When your credit is pulled in the future, it will state under each debt that is in credit counseling a note stating something along the lines of “Consumer is in Credit Counseling” or “account under credit consolidation”. When a company sees this, it possibly deters them, as they are afraid that you might not be able to manage your bills AND most importantly, they might not be able to make the money made off of interest, as that is what is cut when your payments are lowered.
There are legitimate CCC agencies mixed in with the scam artists. They are funded by the credit card companies, but the card companies have seriously undermined their funding. There will usually be a fee - the amount is where you’ll find out if you are dealing with a legitimate firm or scam artists abusing the rules. Non-profit means the company earns no money - it does not mean the owners don’t make any money or that the people work there for free.
A legitimate CCC agency will negotiate on your behalf with the credit card issuers. They generally won’t get anything more than you could, but they’ve more experience and if you owe many , they’ll handle all of them. They’ll set up a budget and payment process. I don’t think they’ll handle secured loans, such as mortgage or auto, but I’m not 100% sure on this. You pay the CCC agency, they take their fee, and then they distribute to the credit card issuers. You should expect a monthly statement from the CCC agency; a website is a bonus. You should match up their statement with your credit card statement.
One of the scams I’ve heard is the one that puts the debtor one month in arrears before it begins. The CCC agency will collect the first month, the debtor thinks it is going to pay his/her debt, but it is really a fee. Sure it is all there in the fine print, but it is not clear. The phone calls that one hoped would be stopping just intensify. Also beware agencies whose debt counseling is really a sales pitch for a debt consolidation loan.
These agencies do little you could not do on your own - they do, however, make it easier to get it done. Either way, ensure that your cards can no longer be used, and resist all temptation to apply for new credit.
They will help you by consolidating your debt, and paying it off, perhaps getting it reduced. At the exhorbitant rates/mon. charged for carried debt the ccc’s will settle for a part of the interest. The counselers get a cut for their services. You should cut up every credit card but ONE and pay off the charges at the end of the month or cut that card up too!
If you can’t pay it off monthly you aren’t allowed to have one.** “Momma said so.”!**
The credit counseling place is going to close all of my accounts anyway, which is probably for the better.
Closed accounts look bad on credit reports, but not as much as having as much debt as I do. (For the record, I almost always make my payments on time. I think that I have one 30-day late payment ever.)
Using a CC place is going to hurt my credit in itself.
So verdict is 4) Doing this myself would save my credit a little, but I’d lose out on the reduced interest/payments that they’d be able to negotiate for me.
Does anyone have any tips on how to lower my interest rates on my cards? Some of them are ridiculous (as in >30% ridiculous.)?
CCC agencies don’t have any special tricks. They call the credit card company and negotiate, which you could also do. They’re better at it, because they do it daily. That’s it.
The card company is charging you 30%. When you tell them you can’t make the minimums, and that the debt might default, they will work with you. They will close the account (no new charges); they will cut your interest rates and they will give you a plan. As long as you continue to make payments, they won’t give you grief. The credit card companies are used to this - it is routine for them. It’s in their best interest to keep you paying at 18% rather than to have you default at 30%. If you can budget yourself and have the discipline to pay off the cards, you are better off doing it alone. If you want someone to help budgeting and to help with your discipline in paying, then use an agency.
spingears, maybe I’m being a pedant about terminology, but CCC agencies shouldn’t consolidate one’s outstanding debt; consolidation is yet another loan, whose proceeds are used to pay off existing loans. Some may offer that service, but I’d be wary of that approach. CCC agencies do work as a clearinghouse; one pays the CCC agency, and the agency distributes the funds to the lenders.