Credit Management

[Acehawk74]

Hey guys. I'm facing a bit of an issue, and I need some input from people who know a good deal about the way this works. Here is a little background:

My wife and I have about $21 grand in Credit Card debt, and a personal loan for $3500 to pay off. We were looking at one of those "credit counseling services" where they negotiate lower payments, etc.. I called one of them up, and was told that basically we only would end up paying off roughly 10-12 grand of this, and it would show on our credit report as "Settled for zero balance". My concerns are this.. I feel rather seedy for not paying the balance in full, and I most certainly am not trying to dodge the debt. I want to make sure I pay this the right way, and I don't want to hurt my credit most importantly. However, if this won't hurt my credit score, the lower monthly payments are certainly attractive. How exactly would these counseling services work with my credit score? Am I wrong in thinking that paying the settled balance will negatively affect my credit? Thanks in advance.

[Sakuraba]

I think this would hurt your credit score. I think they would stop being satisfactory accounts and become derogative accounts. If that is true, it would hurt your score. I think you should do some research on creditboards.com. There is a lot of good information there. You should be able to get the answer to your question there.

On a more philosophical level, I think this would absolutely be dodging the debt. I don't understand how you could view it any other way. You are not going to pay them back all of the money that you agreed to.

[ColdCaller]

Credit counseling services are nothing more than shill setups by the banks who control the major credit card operations, calling themselves "non-profit" to attract people to do this rather than bankruptcy. In many cases bankruptcy is less damaging.

I have a lot of charged-off accounts that I repaid in full, and I promise, credit counseling would make it even worse.

[black_russian]

My understanding of those services is tha you come out of it with destroyed credit! They negotiate with the crediters and say that you cant afford the debt you assumed. The crediters agree to this and write the rest off which then becomes income to you (I think)! I dont have first hand knowledge and is just heresay. But seriously, you dont expect to pay half of your debt and get away scotfree do you? I suggest you look into why you have gotten into this debt as it is none of my business but the reasons you got into debt are similar to why you want to believe this fantasy. Be honest with yourselves. Your post strikes me as written by someone who likes to believe in fantasies.....like I can afford this TV because I'll get a promotion next year or work a second job, etc. Adjust this way of thinking and your life will be much better in the long run. There is no more satisfying feeling than having control over your personal finances! It takes a lot of hard work/reading/time to get out of debt to achieve this but it is for the better. I got credit card companies to pay me $600 last year for promotions. They hate people like me [img]/images/graemlins/smile.gif[/img]

Also, I do have experience the CC debt as I carried 5K through some of my college years. You can find 0% promotions on the lifetime of a balance transfer! So long as your credit is gone already. Dont leave CC's close to being maxed out. Try to consolidate it to 1 or 2 CC if possible at a low % and then adjust your lifestyle to pay it off. You will feel much better abuot it if you work your way out of it.

[Acehawk74]

Thanks a lot guys.

I agree with you Sakuraba, I do feel as if I would be "dodging the debt". I do not wish to do this, and It did seem too good to be true. Thanks for the link, I will definatley check it out.

ColdCaller, thanks for this input, I was wondering about who actually set up these services.

Blackrussian, thanks as well. For the record, the credit card debt is something that was largely medically related, not random charge ups that were "ooh lets get this". I'm not as fantasy driven as I may seem, thats my bad =) I was mainly curious if these deals were truly too good to be true, etc. That said, your advice is excellent advice, and should be taken by anyone in general about responsible management of debt. I was just simply looking into it to see if it were a viable option, and i found out today what it actually does. This concerned me, and as Sakuraba said, it seemed like I would be dodging the debt, and that is roughly how it seemed to me. Morally, I find this part the most disturbing.

I certainly am not going to accept this offer, especially with the insight that you three provided. You guys are right, I do feel it would feel signifigantly better if I were to pay them off in full. Thanks for the input, advice and assistance.

[ColdCaller]

If you can honestly not repay, then look into bankruptcy. The credit companies make bankruptcy as something so unbelievably heinous, when in reality, it is nothing of the sort (for now, anyway).

If you can pay, I urge you to do so. Just call your credit card companies and say "Look, I'm having a difficult time paying these back because the interest rate is so high. Can you zero out my APR for 3 months and I'll do automatic payments through my checking account?"

They'll be more than happy to work with you, I promise. They aren't so bad of people if you actually care to pay them some attention (and your money, of course).

I wish I had not screwed up when I was younger. Now my credit is just finally getting around to being on the right track (over 6 charged-off accounts that I ended up paying in full to creditors, which was stupid since I could have settled for much less with no further negative problems) at 632 FICO score, which is still pretty dismal.

I have a lot of work to do, but I have the people at CreditFactors to thank for it. If you need help finding a way out and rebuilding credit, Christine's services are worth paying for.

[ElaineMonster]

There are two kinds of credit counseling services.

If you use one, make sure it's Consumer Credit Counseling. They are the real deal. They are non-profit and they work to help you. They negotiate with your creditors to lower your debts and they also help you budget and manage your money.

The other kind are not good. They mess with your credit score deliberately to force the creditors to take what they can get. They also take a huge cut of your payments. Beware!

The new bankruptcy laws (which are way more strict as of October 2005) will force you to use credit counseling anyway, so if you're considering bankruptcy you may as well start with credit counseling before you decide.

Don't feel bad about paying off only part of the debt. Your creditors wouldn't agree to it if it were as bad as you feel it is.

And ColdCaller is right about trying to negotiate directly with the creditors. You'd be surprised how willing they are to cut you a deal. (If you're really interested in protecting/ improving your credit score, make sure that they report the debt as "in good standing," "closed in good standing," or "paid in full" rather than "settled."

[black_russian]

Sorry if I read too much into your post. Credit cards can be convenient for emergencies like medical expenses. Not hard to spend 20k on medical Hope all is well.

[Aceshigh7]

$24,500 is nothing. I'm almost double that. [img]/images/graemlins/frown.gif[/img]

[eggzz]

[ QUOTE ]
If you use one, make sure it's Consumer Credit Counseling. They are the real deal. They are non-profit and they work to help you. They negotiate with your creditors to lower your debts and they also help you budget and manage your money.

[/ QUOTE ]

If you are interested, look up posts that I have made. I detailed at length my own experiences with Consumer Credit Counseling Services, and it was one of the great turning moments (for the better) in my young life.

Dealing with them taught me a lot of personal responsibility and better yet, got me 100% debt free. Once you achieve 0% credit card debt, you never want to go back, and you have the positive experience of accomplishing this which makes it easier to maintain this type of fiscally responsible lifestyle.

Amen Elaine