Should you trust a debt relief company?
Thats what were looking at this week.
This weeks question comes from Carolyn:
I have debt in the amount of $15,000.
The loan consolidation payments would be cheaper, almost $160.00 and at 42 months.
My thing is after they are paid the accounts will be closed permanently.
I dont care about that, my concern is will my credit score go down when they close?
Either way, you better be careful about what youre getting into.
It wont stop late fees, collection notices or even threats of being sued while settlement negotiations play out.
And that could take years.
This maneuver is one step short of a bankruptcy, says Rossman.
It will have a significant negative effect on this individuals credit.
Its better than not paying at all, but settling for less than you owe has major credit consequences.
So, yes, debt settlement can hurt your credit almost as much as bankruptcy.
Thats why it should be a last-ditch effort on your way to bankruptcy, when youveexhausted all other options.
Rather, think about the credit ramifications youre experiencing now or in the near-term if your habits dont change.
Creditors such as hospitals and credit card companies sometimes allow these types of forbearance programs, says Rossman.
SuggestsCreditCards.com:
Sum up the situation.
Explain that your financial picture has changed, but you still want to honor your commitment.
Either ask what the collector or creditor can offer, or propose your own plan.
You may hear yes, no or be referred to another department.
You want to get to a place where you’re free to make affordable payments on time.
Get an agreement in writing.
You cant collect any fees from a customer before you have settled or otherwise resolved the consumers debts.
You have to disclose certain information before signing people up for your services.
You cant misrepresent your services.
The new Rule prohibits you from making false or unsubstantiated claims about your services.
Debt consolidation is similarly flawed.
To summarize: Be suspicious of any company promising to settle your debt for you.
And only use it as a last resort.
