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when credit counseling goes wrong

when credit counseling goes wrong

photo by steed media service

Creditors got you climbing a wall? Perhaps a ladder would be helpful. Surely you’ve seen the constant barrage of commercials on TV advertising some new debt consolidation service promising to dig you out of your financial hole in no time. And if you’re like most people, such services have appeared sketchy, at best. You’re right to question their validity. But before you ward off all manner of help, you should do a little research to find out what legitimate credit counseling can do to help get you back on track. 

The first step is distinguishing debt consolidation from credit repair and/or credit counseling. According to TransUnion, credit counseling is a $7 billion a year industry, despite the fact that non-profit agencies are the main providers. Such services can be more expensive than they’re worth and can even further damage your credit in some cases. That also goes for credit repair companies, which often clear credit reports of even the accurate information through illegal means. Some debt consolidation firms may go so far as to offer consolidation loans. 

There are also plenty potential hazards to look out for when attempting to determine which service to go with. Just like credit cards, fees can add up with these services. And you also have to look out for consolidation services that may skip the initial payment to the creditor in order to pocket the money, which has adverse effects on the credit you’re attempting to repair in the first place. 

Some creditors even frown upon those who accept credit counseling, which could also affect your credit. In addition, the aggressive nature of such services and their disputing methods could cause positive details to be removed from your credit as well. 

The moral of the story is, just because you choose to use such an agency doesn’t mean you shouldn’t continue to keep tabs on your credit. Do your homework before and after determining which service is for you to make sure they don’t do anything that could put you in a worse position than you started in. And if you’re willing to do all that, then you might want to consider forgoing such services altogether. Study your own credit reports. Dispute the false claims and clean up your credit yourself. School yourself on the proper methods to raise your credit score over time. That’s the only way to make sure you’re climbing out of a hole versus digging yourself into a deeper one. –r. batson