Debt Question

Discussion in 'Chit Chat' started by budmickl, Feb 4, 2008.

  1. budmickl

    budmickl New Member

    Has anyone used Consumer Credit Counseling Services?

    If so, what is your opinion? Was it an experience you would do again?

    My credit is shot so I have nothing to lose but I don't want to get skrewed even more.

  2. PVLady

    PVLady New Member

    Check out the website of Larry Winget. I have read a couple of his books and find him entertaining and helpful. He has a tv program on A&E on Saturday called "Big Spender" - I am one of the worst spenders ever and am trying hard to control impulse spending.

    The article below says that when your creditors see you using a credit counselor they equate that you are filing a Chapter 13 Bankruptcy.

    I don't know your exact circumstance but there is always a start over, or starting point to change. If need be, maybe you could make a budget, then if possible - ask a relative to help you get caught up on bills and go forward making changes - this as a alternative to paying the credit counselor.

    Anyway, Larry Winget seems to have a answer without seeing credit counselors. It involves making changes, etc. You can probably find his latest book at the library.

    I am not assuming everyone has debt because they did not manage money. I know many of us are sick and lose our jobs, etc. This is just one other perspective...

    The credit counselors will try to put you on a budget and you can do this yourself. They do charge money and I wonder if you can't do this yourself with a little guidance.

    Here is one article:

    Don’t complicate it!

    February 4th, 2008 by Larry Winget in Money | No Comments ?

    Okay, how tough was it for you to get in debt? Not very tough I bet. You simply spent more than you earned. That is all it took for you to get in over your head.

    You did it a variety of ways: a movie you didn’t have the money for and you bought the tickets on your Mastercard. A Saturday morning breakfast out with the family that you slipped onto your Visa.

    A little here, a little there. Am I right? You didn’t mean for all to add up but it just happened! That is how you get out of debt too. You simply spend LESS than you earn. You don’t indulge yourself with a movie or a meal that you don’t have the cash to pay for.

    And that is cash that is budgeted for those things. You don’t use the grocery money to go to the movies. You don’t use car payment money to buy breakfast. You only use money (cash) for what it is budgeted for.

    And you steer clear of using your credit card except for emergencies and then only after you have exhausted all other forms of payment. That is how you get out of your ridiculous predicament.

    A little here, a little there. You didn’t get IN trouble overnight and you won’t get OUT of trouble overnight either. Be patient. Make your life about doing the right thing, the thing you know you should be doing every day. Take care of the little things and the big things will take care of themselves.


    Next, here is a article on the Credit Counseling agencies..

    The Truth About Credit Counseling

    Can you afford to get out of debt this way?
    by Lisa Sanders
    Supporting a family on one income is difficult; even two-income families in the US find themselves carrying an average of $10,000 in credit card debt alone.

    If your family has found itself sinking, you're not alone. You may be tempted to join a Credit Counseling Service (CCS) for assistance, but before you do, let me tell you about some potential drawbacks of these services.

    Charges and hidden fees can add up
    I'll start by mentioning the additional money you may be required to spend each month through a CCS program. Seemingly small monthly charges can really cost you over the term of your agreement with CCS, even though the agency itself may not charge them.

    For example, most services require payment in the form of money order or certified check. A survey of banks in the Washington, DC area found that fees for certified checks could be as high as $13.00. Adding a stamp makes it $160 per year--just to send your payment!

    Another surprising fee is the initial deposit required by Credit Counseling agencies. The first month's payment, which is collected as soon as you start the program, is not actually disbursed until your second payment is received.

    Although this deposit is generally refunded at the completion of the program, it may cause hardship for families having difficulty making ends meet. One man I interviewed had a monthly CCS payment of $865.

    He forwarded his first check to the counseling agency, but was advised to also make the minimum payments on his credit cards, as his CCS payment would not be disbursed to his creditors until the second month of the program. "If I had the extra thousand dollars laying around, I wouldn't have needed the CCS program," he said.

    Who are they really working for?

    Even non-profit credit counseling employees need to be paid, and this fee comes from the money you provide to each creditor. A recent Money magazine article states: "Creditors typically pay [CCS] a fee equal to 11% of the amount you fork over to pay off your bills."

    Although this is standard practice in the Credit Counseling Services industry, it is something you will need to discuss with your counselor. Many agencies also request management fees and/or donations, which are automatically deducted from your monthly payments.

    Yet another fee many consumers going through CCS programs may face is the long-distance charges for calling the Customer Service line.

    One woman in Pennsylvania, who signed up with a Credit Counseling Service through their toll-free number, was later informed that all telephone customer service for existing customers was handled through the main customer service line--which was not toll-free.

    When her accounts were paid late, she called the main number and waited on hold for nearly 25 minutes while a representative tried to determine what had happened to her payment.

    A big negative on your credit report--especially for mortgages

    In addition to the hidden fees associated with a credit counseling program, you should also consider the effect this partnership will have on your credit report.

    For example, a collections agent for a major credit card informed me, "I have had people tell me that they are going through a Credit Counseling Service, but we didn't get a proposal from the service until 6 or 8 weeks later." This means your account may become 60 days past due, even though you've made timely payments to your CCS program.

    Furthermore, the creditors you include in the program generally note on your credit report that the debt has been assigned to a third party for assistance.

    To avoid the accrual of late charges and additional negative marks on your credit report, you will need to call all of the creditors you assigned to the CCS program and change your due dates to coincide with the CCS disbursement.

    This is not done automatically. You will need to keep a close eye on the credit card statements to make sure there are no late charges assessed while you are on the program. Your CCS agency will generally have these charges reversed after they are identified.

    While the marketing agents for the Credit Counseling agencies try to convince you that joining will show future lenders that you are responsible with your money, it may actually have the opposite effect.

    Nancy Yagich, the Lending Risk Manager for National City Mortgage, told me, "The majority of lenders initially look at joining a Credit Counseling Service similarly to filing Chapter 13 bankruptcy."

    A loan officer from another leading mortgage company told me that joining a credit counseling service demonstrates a customer's inability to handle his or her own finances. (However, you may still qualify for some loans through high-risk programs, which requires you to pay higher interest rates and make a larger down payment.)

    Doing it yourself, with some anonymous help
    Credit Counseling Services have helped many people escape the grip of debt, but there are other, better alternatives. Your main focus should not be simply paying off your debt, but changing your way of life.

    Debtor's Anonymous is a really good place to begin this process. It follows the twelve-step method of other addiction recovery programs, with the focus of not accruing additional debt. Even if you do not join a chapter, you can live the philosophy by joining their online support group at Yahoo! Groups, or reading Karen Casanova's book, Letting Go of Debt, which has daily meditations to help you avoid debt, one day at a time.

    Financial counseling is another alternative. These organizations help consumers learn budgeting skills and will teach you how to pay off your debts by yourself. A listing of counselors in your area can be obtained from the Department of Housing and Urban Development website. You may also find a financial counselor in your area by checking your local yellow pages.

    There are many books available to help you manage your debt yourself. Titles suggested by people who have "been there" include:

    Get Out of Debt

    How to Get Out of Debt, Stay Out of Debt & Live Prosperously, by Jerrold Mundis

    Rapid Debt Reduction Strategies, by John Avanzini

    Rich Dad, Poor Dad, by Robert T. Kiyosaki

    Look for these books, as well as other debt reduction books, at your local library. They will give you the tools you need to be your own credit counseling agency--without any of the potential drawbacks of including a third party.


    Lastly, several years ago I began monitoring my credit online. I order my credit report through all three agencies several times a year. Just to make sure there are no errors, etc.

    In the beginning I found many mistakes, plus old accounts I had closed that showed open. You need to be careful when closing accounts because sometimes it will actually lower your credit score. If you have not ordered your credit report you might start there. Then you can monitor as your credit score goes up.

    These scores go from 0 to 850 I believe. My score fluctuates but is normally around 760. That is a good score but it was not there when I started years ago. I had a wake up call I guess and started watching everything.

    You may have debt but the important thing is to never make a late payment. Your credit score will stay high.

    Hope this helps in some way.....

    [This Message was Edited on 02/04/2008]
  3. Janalynn

    Janalynn New Member

    Be very careful with credit counseling. When you say your credit is shot - what exactly do you mean? Do you know your credit score. You will have three credit scores from the three different credit bureaus. The middle score is what is counted as your credit score. (not an average of the three, but the actual middle score)
    I'm in an industry where I deal with credit on a daily basis. I have seen people get in more trouble with debt consolidators.
    There are many factors that I would consider before turning your debt over to CCC (consumer credit counseling)
    Are you not able to pay your minimum payments?
    Are you already in collections?
    Are there errors on your credit report?
    Have you tried to contact your creditors on your own and making negotiations?
    Do you see your situation remaining the same, getting better or getting worse in the future?

    As someone else mentioned - Closing accounts often lowers your credit score as it brings your 'activity more recent and lowers your available credit. Strange it seems but true.
    Get a copy of your credit report from all three credit bureaus. Experian, Transunion and Equifax. Check for errors. I had someone else's mortgage on mine! If there is the same error on all three, you have to contact all three to get it taken care of.
    If you are behind on your payments contact the account holders and see if they will work out a plan for you for repayment.
    If you are about to be behind, see if they will work out a plan in exchange for not reporting it late.
    What people don't realize is that IF the credit counseling service makes your payment late(happens all the time) you're left with the problem.
    In some cases it's not a bad thing - but it really depends on your individual situation and I'd try everything else first. IF you plan on trying to secure credit for a car or a mortgage in the next few years CCC actually reflects negatively on your credit.
    Feel like I need to point that out!!
    Also an FYI- EVERYONE should get on the phone with their credit card companies and ask for theit interest rates to be lowered. All it takes it a phone call.
  4. Janalynn

    Janalynn New Member

    Excellent post. I didn't actually read it before I posted, but I just went back and read it. GREAT!
  5. budmickl

    budmickl New Member

    Thank you for your answers.

    When I say my credit is shot, I mean I have let credit cards go delinquent. Right now, I have the answering machine and phone ringers turned off because of all the collection calls.

    Right now, I am most focused on making sure the house payment, insurance and utilities are paid. Everything else is going delinquent.

    I even stopped my trash service. I'm going to down grade to dial up from DSL. And lastly, cable is being turned off when this billing cycle is up.

    The problem is not just the amount of credit card debt (and fed/state taxes) I owe. It's that I just don't make enough money to pay them.

    I had been off work for 4 yrs, going back in October to a job that I didn't understand how it paid. But I am paralyzed again with fear and depression and can't seem to keep looking for a better job.

    I figure at some point, I can file bankruptcy. Not the ideal answer but I did it before (25 yrs ago) and recovered so if it does come to that, hopefully I will recover again.

    [This Message was Edited on 02/05/2008]
    [This Message was Edited on 02/05/2008]
  6. PVLady

    PVLady New Member

    Please don't be discouraged, most of us have been there at one time.. The best thing to do it take one day at a time and start a plan to make things better.

    In the big picture, you may need to make some hard decisions, like selling your house if you cannot afford it. That book I mentioned by Wingert is good.

    He tells people how to turn it all around without using credit counselors. It does not happen overnight but if you start moving in that direction and make a plan, you will feel better.

    It is easy in these situations to go into denial because it seems so overwhelming. The bankruptcy laws have changed drastically and it is not that easy to file anymore.

    It would be great if someone could loan you money to get caught up, then try to make payment arrangements with your creditors, promising to make the arranged payments.

    A really important thing is to never have a late payment. Last night after responding to you I went back and checked my credit (online) with all three agencies. I found several errors with one (Transunion).

    They had several accounts that were long closed listed as still open. Also, prior addresses that were not mine.

    All of these inaccuracies affect you. If you can go online and check your credit report and scores, you can begin by noting all errors, and doing a dispute online. By law I believe they must correct your record within 30 days.

    If you own the house can you possibly get any money out of the house? I mean to use this to get caught up and possibly pay off the smaller credit cards or whatever.

    I am so mad because I have worked so hard for years to have a good credit record. I started paying attention about 15 years ago. I own a business and at one time had a office in Long Beach. That was years ago.

    Anyway, the dept of EDD where you pay payroll taxes apparently was sending mail to this old address just questioning if I had payroll in a certain quarter.

    Now, they know where I am because I pay these taxes every month, but they still were mailing to this old address.

    Because the mail was not forwarded to me, and they received no response, they filed a tax lien against me for $200. It will stay on my record for 7 years!!!! I called them as soon as I discovered this lien and they were the most rude people I have ever seen.

    I hope you at least start monitoring your credit for mistakes. It is a good first step.