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Counseling services are available to help people budget money and pay bills. Credit
unions, Cooperative Extension offices, military family service centers and religious
organizations are among those that may offer free or low-cost credit counseling.
Local, nonprofit agencies that provide educational programs on money management and
help in developing debt payment plans operate under the name Consumer Credit Counseling
Service (CCCS). They are members of the National Foundation for Credit
Counseling (NFCC). Call for more information: 1-800-388-2227.
| Debt Management Assistance
Several national nonprofit organizations also provide information and assist
people with debt problems
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Typically, a counseling service will negotiate lower payments with your creditors,
then make the payments using money you send to them each month. The cost of setting up
this debt-management plan is paid by the creditor not you. Ask these questions to find
the best counselor for you:
- What services do you offer? Look for an organization that offers
budget counseling and money management classes as well as a debt-management plan.
- Do you offer free information? Avoid organizations that charge
for information or make you provide a lot of details about your problem first.
- What are your fees? Are there set-up and/or monthly fees? A
typical set-up fee is $10. If you're paying a lot more, you could be the one
getting set up.
- How will the debt management plan work? What debts can be
included in the plan and will you get regular reports on your accounts?
- Ask if the counselor can get creditors to lower or eliminate interest
and fees. If the answer is yes, contact your creditors to verify this.
- Ask what happens if you can't afford to pay. If an organization
won't help you because you can't afford to pay, go somewhere else for help.
- Will your counselor help you avoid future problems? Getting a
plan for avoiding future debt is as important as solving the immediate debt
problem.
- Ask for a contract. All verbal promises should be in
writing before you pay any money.
- Are your counselors accredited or certified? Legitimate credit
counseling firms are affiliated with the National Foundation for Credit Counseling or
the Association of Independent Consumer Credit Counseling Agencies.
Unfortunately, honest credit counselors have a lot of rivals who are more
interested in taking your money than helping you. They can do more harm than good.
Red flags are:
- Big upfront fees. A reputable credit counseling agency will
send free information about itself and the services it provides without requiring
you to provide any details about your situation.
- Unrealistic promises. Some companies falsely claim they can
solve problems for pennies on the dollar or remove negative information from
your credit record.
Check with your local consumer protection agency and the
Better Business Bureau
to see if any complaints have been filed about the counseling service you're considering.
If you have concerns about approved credit counseling agencies or credit
counseling providers, please contact the U.S. Trustee Program .
| Be Alert... Credit Repair Scams
Before you sign up for fee based credit repair services, beware. Many of the promised services are either illegal or provide services you can do for free by yourself. Before you sign up to work with these companies, here are some tidbits to keep in mind:
- A credit repair company must give you a copy of the “Consumer Credit File Rights under State and Federal Law” before you sign a contract.
- The company cannot perform any services until you have signed a written contract and completed a three day waiting period, during which time you can cancel the contract without paying any fees.
- They cannot charge you until they have completed the promised services, under the Credit Repair Organizations Act.
- It is illegal to erase timely and accurate negative information contained in your credit history.
- Suggestions that you create a new credit history (also called file segregation) by requesting an Employer Identification Number from the IRS are also illegal.
- You can work to solve your own credit challenges, by requesting a free copy of your credit report through annualcreditreport.com , and by working with creditors to dispute incorrect information.
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