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Credit Counseling Gone Bad: 5 Strategies to Avoid the Credit Counseling Crunch
“If you want it done right, do it yourself.” You’ve heard that saying, right? Well, never has that saying been more true that in relation to your credit card debt.
I was returning a book on credit card debt to the library when I met my neighbor. Noticing the title of the book, he replied.” If you have credit card debt, do what you have to do, but do it yourself. Don’t go to those credit counseling services.”
My neighbor told me his tale of credit counseling gone bad when he hired a credit counseling service mainly to get lower interest rates on his credit card payments, which were current at the time.
Here’s what he discovered through the “school of hard knocks” when he hired a credit counseling service to help him manage his credit card debt:
Rate negotiation: Negotiate lower interest rates yourself. Credit counseling services aren’t the only ones who can negotiate lower interest rates. When my neighbor became frustrated with the credit counseling service, he requested his account information and decided to manage the payments on his credit card debt himself. He contacted all of his existing creditors and most agreed to accept the monthly payments negotiated by the credit counseling service. Only the creditor that had increased his interest rate refused to cooperate.
Payments: Make sure you control how the payments are made. In this situation, the credit counselor handling the account made a mistake by doubling his monthly payment on one account and neglecting to make a payment on another account.
Timeliness: Stay current with your payments. The one missed payment caused his interest rate to jump from 9.9% to a whopping 25%. He’s lucky he wasn’t hit with universal where one late payment causes an interest rate hike on several credit cards.
Credit rating: Be aware of the factors affecting your credit rating. My neighbor had planned to transfer the balance on the 25% account to a new card with a balance transfer program, however, he was stuck with the 25% interest charge for about six months because of the notation on his credit report indicating his registration with a credit counseling service.
Communicate: Maintain frequent contact with your credit card companies. Call to be certain that your payment has been received by the due date. Do this monthly. Do this until your account balance is zero. Be very careful about closing out accounts randomly, though, because if you close an old account, it could negatively impact your credit history.
My neighbor's final words to me on this situation were, "We should never have gone to a credit counseling service. We should have negotiated lower interest rates on our own."
If you think my neighbor’s situation is an isolated instance, think again. An article in a 2005 issue of Money magazine reported that in 2004 a Senate committee described the credit counseling services “as an industry that was plagued with ‘excessive fees’, poor service and (customers) generally being left in worse debt than when they initiated their debt management programs.”
To sum it up, when it comes to managing your credit card debt, you make the difference.
To fortify your program for a debt-free life, visit www.enrichedfuture.com for your free copy of "Five Critical, Overlooked Steps for your Life Without Credit Card Debt".
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