Credit Counseling Scams

Many times when people are desperate enough about their debt levels, they will temporarily suspend judgment when that too good to be true deal comes along. I think the movie people call it suspension of disbelief. That's how you can actually sit through 90 minutes of crap and not walk out on it. It somehow seems believable.

Probably the most common scammers out there are agencies who promise to have your debt wiped out. No one can do that legally or ethically. The only chance of that is bankruptcy, and that is what most people are trying to avoid. Worse, they will charge you an arm and a leg for this service and either simply disappear or send you a "we're sorry to inform you that your application for debt elimination has been turned down" letter. So not only do you still owe what you did, but now you have wasted a decent sum of money that could have gone to paying the debt down.

Some quasi-legitimate agencies will actually make some progress for you, but the amount of money you pay them in fees will be hard to determine. Look for an agency that clearly states the monthly and upfront fees you will pay and when you will pay them. Check into several programs to compare fees. Look for agencies that receive funding from sources other than the people being counseled.

Consumer Credit Counseling Services is one of the nation's largest and oldest agencies and most of their funding comes from sources other than people in their debt management programs.

Another scam is agencies who hoard your payments and allow your credit to get worse and worse until they can negotiate a settlement with a creditor. The trick here is that they are settling for less than you have paid them and they keep the difference, plus any fees they may have charged you.

You can do the same thing, and keep the difference in your own pocket.

Avoid agencies that are for-profit. They are numerous, and usually have only a branch or two. Their biggest motivation is profit, not your debt situation. Legitimate credit counseling agencies will be non-profits registered with the state they are working in as well as the federal government.

And lastly, use common sense. No agency can eliminate your debt or repair you credit. Time got you in the hole and only time can get you out. The old "if it sounds too good to be true, it probably is" adage, while done to death, is applicable here.