If you have a debt problem, you have come to the right place to get information and resources to help you get out of debt sooner. Credit consolidation and debt settlement firms will have various priorities when working with you. It is important to be an informed customer, take the time to research each of the companies you see here, and ask plenty of questions before you sign up for anything. Protect your personal information and only give out what you feel comfortable providing. Our buying guide and in-depth reviews on debt consolidation services are intended to help you decide which company is best suited to your context.
There are a few very good reasons why you should consider using a credit consolidation company to manage debt:
To get out of debt in less time with lower fees. Anyone who is in serious debt, whether through past credit card bills, overdue medical expenses, defaulted personal loans, or even problems with making mortgage payments on time, can benefit from getting the help and support of a qualified credit consolidation service. Most people wait until debts are piled high in the thousands before getting help. Credit consolidation companies can eliminate the stress that comes from dealing with massive debts by establishing a realistic consolidation and settlement plan, which allows consumers to pay off debts sooner and for a lot less money.
To establish better credit and a budget. For most individuals, being in debt causes a poor credit rating, which makes it difficult and even impossible to get credit cards, home and auto loans. By signing up for a credit consolidation company, these debts can be paid off over a couple of years and oftentimes for pennies on the dollar. Creditors look at this in a positive way and it helps to rebuild a good credit rating once the debts are paid off. Working with a certified debt counselor can also help you to establish a workable budget, which helps you to manage money better and be more responsible with your credit rating.
To avoid bankruptcy and legal fees. There is a lot of talk about how filing personal bankruptcy can “erase” bad debts and restore credit. This is not always the case. In fact, many times filing bankruptcy can negatively affect credit for many years, making it impossible for consumers to get personal loans and even to get a job. Bankruptcy also costs a lot in legal fees and takes a toll on taxes. The clear alternative to using bankruptcy is working with a credit consolidation and debt settlement firm that can help you pay down debts for a lot less money and redeem your credit history. Paying off debt looks much better on a credit sheet and it does not stop you from having a normal life again in the future in terms of credit.
It is important to keep in mind that credit consolidation companies do not always offer the same services. In fact, many credit and debt firms work with debtors with customized credit consolidation, debt management, debt settlement, credit repair and budgeting aspects that are dependent on their individual needs. Others may have just a couple of simple programs to help people get out of credit card and medical debt. It is up to you to check out the services and products that each credit consolidation company has to offer to determine if it will be a good fit for your specific situation.
Before choosing a credit consolidation company, there are some important things to look for so that you will experience positive results. This is not a complete list, but gives you some major things to consider before signing up for any debt management program.
- Industry Accreditations: Spend some time finding out if a debt consolidation company has meaningful industry accreditations. For example:
- Find out if the firm's debt counselors are certified by the International Association of Professional Debt Arbitrators (IAPDA). The IAPDA has been in operation for more than a decade and is regarded as the leader in debt relief training and certification. IAPDA-certified counselors should have a full grasp of the legal and financial facets of your case, but of course that does not guarantee that they will act in your best interests, so always use your best judgement.
- Find out whether the firm is a "Member" or an "Accredited Member" of the American Fair Credit Council (AFCC). "Members" agree to provide services according to the AFCC's Code of Conduct, while "Accredited Members" are audited yearly, by a 3rd party, to ensure that they are adhering to the AFCC's Code of Conduct. Be aware that The Association of Settlement Companies (TASC) no longer exists; it has been replaced by the AFCC.
- Industry Ratings: Check the industry ratings of the credit consolidation firm. A good credit consolidation or debt management company will most often have a positive rating with industry organizations and the Better Business Bureau (BBB). The best companies will list these affiliations directly on their websites, but you may want to do a little more research on your own. If a company asks for a large sum of money up front, or there are multiple complaints about the company from past consumers, this should raise a red flag for you to move on to another debt settlement company.
- Fees for Services: When choosing a credit consolidation company, be sure you get information up front about any potential costs that you may expect to pay before signing up. Find out whether the debt consolidation company asks for advance fees before the transaction is completed. If the fees seem too high or you cannot afford the regular monthly payments, then it may not be the right debt settlement program for you. Get all terms in writing, including fees for the service, how much of your monthly payment actually goes towards your debts and any reductions in your overall debt as negotiated by the credit consolidation firm.
Statements: A big part of what credit consolidation companies provide is worry-free payoff of debts, but this does not mean you should just forget about what is happening with your money. When selecting a credit consolidation or debt settlement firm, make sure that you have easy access to at least a monthly statement so you can see your dollars at work for you. A company that fails to provide a progress of your financial standing is probably not a good one to get involved with. Pay close attention to your bank statements to ensure that your money is being passed on from the debt consolidation company to your creditors.
Non-profit vs. For-profit: As you go through this directory of credit consolidation and debt management companies, you will notice that some are non-profit organizations while others are private for-profit companies. While you can expect similar services to be available with either type of agency, keep in mind that non-profits are not as interested in making a profit off you as other types of credit consolidation companies, and they may not be able to offer you all of the services that a legally backed private company can offer you. This means the fees you pay may be significantly less with a non-profit, but you may also have fewer options than with a private credit consolidation company.
Credit Rating: Another aspect of working with a credit consolidation or debt management company is how this will ultimately affect your credit rating. It is often the case that you will be asked to provide your social security number as part of the process, but this is used to pull your full credit history. Anytime your credit history is requested, points are added to your credit score, which can cause you potentially negative results, such as higher interest rates or credit security issues. Be sure to ask in advance if and how the company will be checking your credit to determine if a hard or soft pull will take place.
Creditor Acceptance: When deciding which credit consolidation firm to use, be sure to understand how the agency will get creditors to accept the terms of any debt settlement activities. Not all creditors will accept a reduction on past due accounts, and some will not deal with credit consolidation firms. Also, understand that you may still get calls from debt collectors for a while after signing up for a debt management program, until satisfactory repayment agreement takes place. This can take some time so be patient and provide all the information a credit consolidation company asks for to make this happen sooner.
While individual results may vary, depending on the amount and types of debt you have currently, only you can decide what credit consolidation, debt settlement, money management or bankruptcy program will work best for you. You have taken the first step towards a restored credit rating and more responsible money management habits.