Get Out Of Debt Through Credit Card Counseling

You may have seen the commercials on TV for "Freedom Debt Relief" and credit card counseling. These services claim to help you regain control of your life by offering credit card debt reduction.

In some cases, they may even be able to repair your credit to a certain extent. In fact, debt counseling has become a $7 billion a year industry, yet how do you know if these are debt/credit repair scams or legitimate businesses?


Ten years ago, the National Foundation for Credit Counseling and their affiliates at Consumer Credit Counseling Services dominated the credit card counseling scene. They worked with creditors to negotiate payment plans, debt settlements and lower interest rates for people who were slipping behind. However, the rise in consumer debt prompted hundreds of start-ups who were as savvy in the world of advertising as they were credit repair scams.

Some of the competitors, which were often called "debt settlement specialists," charged big upfront fees to pay off multiple creditors for mere pennies on the dollar. Often, people would pay as much as $3,000 off-the-bat to get their accounts up-to-date, only to find that the debt settlers were not paying off their creditors at all! To find a legitimate business, it is recommended that you verify their identity through the Better Business Bureau and stick with one of the well-known, non-profit organizations, like the aforementioned NFCC and CCCS.

When dealing with credit card counseling services, investigate the company before signing up. You needn't pay exorbitant upfront fees for most legitimate companies. Consumer Credit Counseling Services, for example, only charges a $10 set-up fee. If the firm isn't affiliated with the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies, then it could be a scam.

If you find you have delayed or missed payments within the first month of services, then get out, as they may be pocketing your money. Also, beware of false promises to settle your debts for little or no money. If you've missed multiple payments over a long period of time, then you're going to have a low credit score for the next year or two. The information will stay on your record for seven years from the initial delinquency, so patience is needed to repair your credit.

"People who are faced with credit card debt are unwilling to face their financial issues and therefore may be leaving them unresolved," said Ben Woolsey, director of consumer research for "Credit Cards". In a recent study, 35% of card holders were carrying a balance on their credit cards and 15% said they've had some trouble making payments.

Credit card counseling is a good way to get out of the cycle of denial and ignorance, Woolsey added. Many people would rather talk about anything but personal finances. A credit repair company or debt counselor will lay everything on the table, set up an agenda and identify trouble spots.

By: Michael Selvon

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