How Can You Tell If a Credit Counseling Service is Legit?
Is your service really nonprofit credit counseling? I signed up for another program that I thought was through a nonprofit and it ended up ruining my credit because they weren’t paying my creditors every month, so I ended up with a bunch of missed payments. Now I’m having to work extra just to catch up, which is hard because I barely have money to make my minimum payments. I need help but I don’t want to get scammed again.
How to tell if you’re really talking to a credit counseling service
Sorry to hear that the first program you signed up for wasn’t what you thought it was. It sounds like you were working talking to a debt settlement company instead of a nonprofit credit counseling service. And while both programs can legitimate get you out of debt, they do so in very different ways.
The problem is that some less-than-reputable debt settlement companies will essentially present themselves as nonprofit credit counseling organizations. However, these for-profit companies operate very differently. Here’s a quick look at the differences:
|Debt management plan||Debt settlement program|
|Run by a credit counseling organization||Run by a debt settlement company|
|Pays back everything you owe||Pays back a percentage of the principal|
|Pays your creditors every month on an approved payment plan||Holds monthly payment in escrow to make settlement offers|
|Keeps payments current||Often leads to missed payments and more collections|
|No credit report damage||7-year negative item for each debt settled|
The good news is that there are some questions that you can ask that can help you quickly differentiate. Even if the representative that you’re speaking with isn’t being upfront, they legally can’t lie about the service they provide. Thus, you can determine if the service is really what you think you’re signing up for.
What Questions Should You Ask a Credit Counseling Service?
Debt settlement companies may try to masquerade as credit counseling services. Ask a representative these questions to determine if the service you’re signing up for is what you intended. Otherwise, you could wind up with credit damage.
April Lewis-Parks, Consolidated Credit Director of Education: Hi. I’m April with Consolidated Credit and this is Ask the Expert.
Today’s question is: What questions should you ask a credit counseling service?
Working with a credit counseling service can be very beneficial. A certified credit counselor can help you find the best way to get out of debt, based on your needs, credit, and budget.
But you want to make sure you’re working with a legitimate agency and not falling for a bait and switch. Unfortunately, there are debt relief scams out there and some unscrupulous companies try to present their services as credit counseling.
So, you want to ask these questions to make sure you know what you’re getting into. First, ask if the counselors are certified and through which organization. Ask if the service is nonprofit, how and when creditors get paid and make sure to ask about fees.
With a debt management plan through a credit counseling agency, your creditors will be paid every month. A debt management plan has low monthly fees that are based on your budget and the state where you live.
These are some questions to help ensure you’re working with a legitimate credit counseling service. For more information, you can visit ConsolidatedCredit.org.
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Some information on our organization
As far as Consolidated Credit goes, we’re one of the nation’s largest nonprofit credit counseling organizations. We’ve been in business since 1993 and we’ve provided free credit counseling to over 10 million Americans. Many of those have gone on to enroll in a debt management program, that pays off high-interest rate credit card debt in full in 60 payments or less by minimizing interest charges.
As a nonprofit organization, our mission is to help you get out of debt. If a debt management program isn’t the right fit, our certified credit counselors will tell you what is. Debt settlement companies don’t do that.
Unfortunately, Casey, it sounds like signing up for the wrong service has already put you more behind. The good news is that even with delinquent accounts, you may still be eligible to sign up for the right program – a debt management plan.
The process will start with a free debt and budget evaluation from a certified credit counselor. If they determine a debt management plan will work for you, we’ll contact your creditors to see if they’ll accept monthly payments through Consolidated Credit. If so, they will agree to reduce or eliminate the interest charges applied to your balances.
Then, once all your creditors sign off, you’ll start making one monthly payment to Consolidated Credit. We’ll distribute the payment every month to your creditors as agreed, which means you’ll avoid missed payments.
In fact, most creditors will agree to bring delinquent accounts current once you make three payments on the program. This won’t erase the credit damage that’s already been done by those missed payments, but it will help you get back on track faster.
I recommend that you call 1-888-294-3130 to talk to one of our certified credit counselors. Then, you can decide where to go from there.