Student Credit Card Forum

[Snowboarder]

Dear Credit Dude

My boyfriend has lot of credit card debt and has fallen behind in his payments. He signed up with a debt solutions company that she pays monthly to negotiate with his creditors and pay off his debt. He was told this was a good way to go as bankruptcy is worse and his credit rating is already shot. Do you know anything about these companies and if they are a good idea?

[Captain Terrible]

I used CCCS (Consumer Credit Counseling Service) once and it helped me manage my payments and I got everything paid off. It did go on my credit report though and I think it looks bad but not as bad as bankruptcy or not paying your bills.

[Credit Card Guy]

Credit Counseling is for those having trouble remembering to pay numerous debts, unable or unsure how to negotiate with creditors, or who are getting unbearable harassment from debt collectors.

Hundreds of companies out there offer these services and many if not most, are scams in some way. People need to be very careful when they make the decision to get financial help. Legitimate credit counseling firms are affiliated with the National Foundation for Credit Counseling (http://www.nfcc.org/) or the Association of Independent Consumer Credit Counseling Agencies.

A credit counselor will evaluate the situation and may be able to negotiate with creditors to get a more manageable payment- and the company off your back. They can also make your payments for people allowing them to just pay them one flat fee each month. There is always some sort of fee for this, even if its a service fee. The fee may be worth it depending on what your situation is but NEVER, EVER pay a fee for a consultation. A legitimate credit counseling service will evaluate whether or not they can even help you before charging you anything.

Credit counseling does show up on your credit report and does affect your credit score because you are usually forced to close all your credit card accounts as part of the program. Your credit report will show closed accounts which are being managed by a credit counseling service and your credit score reflects a change in your "available credit" to "used credit" ratio. Since your credit card available credit goes to $0 and your keep a balance on them that's where you get socked. This ratio is 305 of your credit score. However if you cards were maxed out anyway its not much worse and if you were making late payments or considering bankruptcy its much better.

Thanks for posting and remember yo check out http://www.studentplatinum.com for more credit card education.