25 Feb 09 How to Avoid Credit Counseling Scams

The worsening economic crisis is making a lot of people desperate. They are turning to debt counseling, credit counseling, and debt consolidation services to get out of their financial problem. Currently, credit counseling has become a $7 billion business industry but not all service providers are reliable. Going for credit counseling can be an effective way to solve debt problems. At the same time, it is also important to realize that there are risks involved when selecting an agency. Fly-by-night entities can disappear suddenly with your money and worsen your already bad credit rating.

Understanding the Industry

About a decade ago, the market was dominated by one major player, the National Foundation of Credit Counseling. This organization has nonprofit partners called the Consumer Credit Counseling Services. They basically negotiated for lower rates on behalf of their clients. But a lot of competition spawned up since then. Ever since consumer debts rose in the 1990’s, this service has become a huge industry.

A lot of credit counseling agencies have slick advertising and great promises. Some do an excellent job in negotiating their client’s rates but there are also some that simply get your money and do nothing. It is important to be wary about these types of agencies. There are also “debt settlement” specialists that promise to help you get rid of your debts as long as you pay several thousand dollars in upfront fee. If you encounter this type of agencies, it would be in your best interest to stay away from them.

Here are some important red flags you should watch out for:

Requires payment of large upfront frees – legitimate companies typically charge $10 for the set-up fee. If the credit counseling agency you go to requires a lot more, then ask for the specific services they provide. Unless you will get extensive money coaching that will take up much of the coach’s time, you may be getting yourself into a scam.

Delayed payments – some entities pocket your first payment to the creditor as their fee. If any missing or delayed payments occur, investigate immediately. Missing or delayed payments will damage your credit rating; the agency will be doing more harm than good if this happens.

No accreditation – don’t go to a credit counseling agency that’s not affiliated with the Association of Independent Consumer Credit Counseling Agencies or similar organizations. It simply heightens your risks.

Share and Enjoy:

Tags: Avoid Credit Counseling Scams, Bad Credit Rating, Business Industry, Consumer Credit Counseling, Consumer Credit Counseling Services, Consumer Debts, Credit Counseling Agency, Credit Counseling Scams, Credit Counseling Services, Debt Consolidation Services, Debt Counseling, Debt Problems, Debt Settlement, Economic Crisis, Fly By Night, Legitimate Companies, National Foundation, Nonprofit Partners, Red Flags, Settlement Specialists, Several Thousand Dollars, Specific Services

Filed in Credit Counseling, Debt Counseling

25 Feb 09 How to Avoid Credit Counseling Scams

Leave a Comment

Translator

Recent Posts

Blogroll

Categories

Gossimer Press Releases

Gossimer News