Hеlр! I hаνе 35,0000 іn credit card debt аnd I аm trying tο figure out whаt tο dο.
If I υѕе a credit counseling company, wіll іt rυіn mе?
If I υѕе one οf those companies, саn I gеt a car loan οr a mortgage іf I need tο during thе time I аm paying back mу debt????
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Tags: Back, companies, Counseling, Credit, help, mortgage, paying, ruin
I hear mixed reports on credit counseling outfits. Check with the Better Business Bureau before choosing one. You don’t want to get hooked up with anyone who promises to “erase debt” or “reduce your bills”. You owe the money; you’ll have to pay it somehow.
The problem most people have isn’t income, it’s spending habits. Hence your $35K debt.
Ultimately, what a credit counseling service is going to do is put the hard truth on the table in front of you. So, here goes:
One place to start is to renegotiate your interest rate with your credit cards. If you’ve missed payments and they’ve ratcheted up the interest rate, you can ask to have it reduced. If they won’t then tell ‘em you’re going to sign up for another card with a lower rate and transfer your balance (be prepared to make good in case they call you on it).
Oh, and stop using credit cards until your debts are paid off.
After that, formulate a budget that includes making hefty payments to your credit cards. Cut out restaraunt dining, cut out the Starbuck’s. No beer. Now would be a great time to quit smoking. Whatever you’re spending money on that’s optional, stop for now. The interest you’re paying to send some bank exec’s kid to college is eating you alive.
While you have more debt that you can service, why are you even thinking about borrowing more money? Borrowing is how you got into this situation. Drive the car you have. Live where you are living, unless you can get into a less expensive place.
Participating in a credit counseling program will not affect your credit score; however, it can make getting credit or financing a lot harder if a particular lender looks on participation in credit counseling unfavorably.
You might be asked to refrain from seeking credit as a condition of participating in the program. If you or the credit counseling service does not make monthly payments on time as agreed, creditors will report this to the credit bureaus, and the late payment notations on your credit report will definitely lower your credit score significantly.
More and more creditors, particularly the big credit card companies, are raising their standards for acceptance while lowering the fees they pay to credit counseling services. In fact, one of the “Big 10″ credit card companies now requires all debtors to prove that they are in financial difficulty before accepting them into a new payment program. Another of the Big 10 credit card companies will actually raise your interest rate when you sign up for a credit counseling program.
In the long run it will not “ruin” you, but your credit will take some time to get back to a “good” standing.
You might find that Chapter 7 most suits your needs. This is faster and easier to get, but you will have to enroll in a credit counseling course through an accredited organization recognized by the FTC.
To find one use the following link, they can help you with more details
http://www. usdoj. gov/ust/eo/bapcpa/ccde/de_approved. htm
Hope this is of help to you.
Contact your local Red Cross for a referral to the local Consumer Credit Counseling Services (CCCS) in your area. They can negotiate much lower payments and interest rates. They DO NOT negotiate settlements.
They will require you to stop using all credit and to cut up your cards. Your credit report will be updated to “enrolled in debt management. ” This does not damage your credit, but it may make it impossible to obtain new credit while you are enrolled in their program. . . . so don’t use this service if you anticipate applying for a new apartment, car loan or mortgage anytime soon, as you would probably be denied while you’re enrolled in the CCCS debt management program. . . . Otherwise, it can be a very good way to deal with your debt.
Please note that CCCS cannot perform miracles in situations where there is an overwhelming level of debt relative to your income/assets. While CCCS is technically a non-profit organization, it is also partially supported/promoted by the credit card industry. My only concern with CCCS is that they would discourage a person from filing for Chapter 7 when in reality that would be in that person’s best interest. Sometimes Chapter 7 bankruptcy is the only solution to overwhelming debt. $35K is a a large amount of debt if you don’t have a large income. If you qualify to file for Chapter 7, you should include filing for Chapter 7 as one of your options for dealing with the debt.
Don’t let anyone smear or guilt-trip you for making this decision if you have to. . . especially all the people who like to quote Dave Ramsey who think that BK should always be avoided. . . . this is ridiculous advise that only benefits credit card companies. . . Of course BK should be avoided if at all possible. . . but sometimes it is needed. Do what’s best for you and your family. Corporate America uses BK all the time and no one slams them.
Just remember that you can only file for Chapter 7 once every eight years. . . . so if you file, you won’t be able to discharge your debts again for eight years, even if you find yourself in a worse financial situation. .
STAY AWAY from any debt settlement firm you see advertised on cable TV or the Internet. . . they will only make things worse for you.
If you are interested in credit counseling, check here for CCCS near you: http://www. nfcc. org/. These are legit, non-profit companies. They can look at your finances and advise you how to proceed. They also offer debt management programs if you qualify.
While in a debt management program, it will be annotated on your credit file. However, when you complete the program, that notation is removed.
Typically, when you sign up for a debt management program, you agree not to use your credit cards or apply for any credit. Frankly, if you have to use a debt management program, the last thing you need to more debt. The idea is to pay off all your existing debts.
Credit counseling is the same thing as declaring bankruptcy. I worked at a mortgage company for over 2 years and when any mortgage banker saw a “credit counseling” service on a credit report the application process was done. This is the same for all mortgage lenders. The guidelines were that you had to be 2 years out of credit counseling before you could be looked at for a new loan.
The credit counseling service will drop your credit scores. It goes on your credit report as if it was a judgement and if I remember correctly stays on your credit report for 10 years. The credit counseling companies force you to stop paying the bills you have decided you can’t pay anymore, thus showing up as late payments on your credit report.
The interesting part is that you still have to pay the credit counseling company. If anything you would be better off contacting your credit card companies and asking them to drop your interest rates on your cards. If that does not work, declaring bankruptcy is the way to go. Sure, you will not be able to get approved on ANY kind of loan for the next 2 years at least, but the debts will be gone. If bankruptcy is an option make sure you have a mortgage and a car you plan on driving for at least the next 3 years before declaring bankruptcy. Those things will stay on your credit report and as long as you keep making payments to those it will keep your a history of on time payments.