How to Separate Legitimate Credit Consolidation Services from Scams
Don’t let debt relief scammers drain your funds and damage your credit!
Debt problems are bad enough on their own. But when you seek professional help only to be scammed, it just makes a bad situation even worse. There are plenty of reputable, accredited credit consolidation services with certified counselors who are ready to help you overcome debt. However, for every legitimate consolidation service, there are also scammers who are out to make a quick buck off your desperation. Here’s how to tell the difference…
#1: Upfront fees are a sure sign of a scam
Nonprofit consumer credit counseling agencies never charge a fee for the initial debt evaluation. There are fees that apply if you enroll in a debt management program to set up and administer your repayment plan. However, these are always rolled into the plan once you’ve enrolled.
If a company makes you pay a fee upfront without doing any actual work, it’s a scam. It’s also a scam if they require lots of money upfront to set you up. Credit consolidation fees are state-regulated. At most, they are capped at $69. So, if a company says they charge more than that, they’re not following government debt relief regulations.
What are the fees for a debt management program?
This video explains how fees get applied when a consumer consolidates credit card debt using a debt management program. Since credit counseling agencies that administer debt management programs are nonprofit organizations, fees are low compared to other solutions. They are also regulated by federal and state laws.
What are the fees for a debt management program?
Fees are based on your budget, how many credit cards you have and how much you owe. The average client pays about $40 a month. And while the fees vary state by state, they’re limited to $79 a month.
Debt management program costs are governed by the Uniform Debt Management Services Act. But, here’s the best part – those fees are rolled into your debt management program, so there’s no separate cost.
And those fees are just a small percentage of how much money you’ll save by getting rid of your debts with the reduced interest rates. You’ll pay less while saving a lot.
#2: They make guarantees about boosting your credit score by a certain number
When done correctly, credit consolidation should not hurt your credit score. In many cases, successfully completing a debt management program can improve your credit score. However, there is no guarantee that consolidation will always improve your credit. And there’s certainly no guarantee it will improve it by a certain amount.
In some cases, the effect of consolidation is neutral on your score. That means it doesn’t hurt your score, but it doesn’t improve it either. It all depends on where your score is when you consolidate. If you managed to maintain excellent credit during your financial distress, then you don’t have much room for improvement.
However, since many people experience credit damage during financial distress, consolidation can improve your score. It impacts the two biggest factors used to calculate your credit.
Infographic
Credit Score Idol
Do you have what it takes to be a credit score superstar? Learn about the five credit score factors that determine credit score and how it’s calculated….
Read more
#3: They tell you this is a secret solution your creditors don’t want you to know
Credit consolidation should not be confused with debt settlement. Debt settlement is when you pay a creditor less than the full amount you owe in exchange for final discharge. You get out of debt “for pennies on the dollar.” This is not necessarily a scam – it’s legal and totally possible to settle your debts this way.
However, that is not credit consolidation!
With consolidation, you pay back everything you owe in a more efficient way with lower interest charges. As a result, as mentioned above, you don’t damage your credit when you do it correctly. Settlement always incurs credit damage. Each settled debt results in a negative item on your credit that remains for seven years from the discharge date. You also can incur missed payments in your credit history if you stop making payments to generate your settlement fund.
Settlement companies often try to masquerade as consolidation. They try to claim that debt relief is debt relief – as long as you get out of debt, you accomplish your goal. But there’s a right way and a wrong way to address challenges with debt. And all solutions are definitely not created equal.
#4: The company tells you to do something that sounds illegal
Yes, there are actually companies out there that get paid to tell you to break the law. This is often done with credit repair services that often come with consolidation. For example, they tell you to get a new Social Security number so you can start a clean credit profile. Other companies may tell you to get an Employer Identification Number (EIN) to do the same thing.
Trying to create a new identity to escape your debt and credit problems is against the law. Any company that advises you to do this is inviting you to break the law. And you can be held liable for fraud.
Consolidated Credit provides accredited, legitimate credit consolidation services
Consolidated Credit has an A+ rating with the BBB. We’ve provided credit consolidation services for over 25 years, helping 6.5 million people get out of debt. We’re a member of the Association of Credit Counseling Professionals (ACCPros).
We understand that reaching out for help can be intimidating a scary, but we take every step possible to explain the process and answer any questions you have. Even if you’re reluctant, call now to find out how we can help you find relief.
Deotha Goes from Reluctance to Relief
After being burned by another credit counseling agency, Deotha wondered is Consolidated Credit legit? She did some research and put her trust in the process, and now she’s debt free. Read Deotha’s story to see how she went from reluctant to relieved….
Read the StoryWe can also show you real results from some of those 6.5 million clients to show you what our credit consolidation services can do in action:
If you need to consolidate credit card debt to avoid bankruptcy and save your credit, we can help.
