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I've seen several advertisements on TV claiming to help people who have large amounts of credit card debt. They say that they can reduce the amount you owe to the CC companies to a fraction of the cost. How can this be true?? Is this some type of consolidation method? Has anyone ever used one of these companies and if so, what are the effects on your credit rating afterwards??
Most of these companies are "debt settlement" companies. There have been many threads here about them, you can do a search to bring them up.
They are bad news !!!
They never tell you up front that they can not protect you from the credit card company reporting the account going past due or suing if they want.
The effect on your credit is negative they will report as settle which will stay on your credit for 7 years ,also any amount you settle over $599 may result in a 1099 that you have to report as income to the IRS
Thanks Karla. Most of the time, these ads are too good to be true without some kind of repercussion. There's always small print which is hard to spot up front.
your welcome
Basically how they work is you send them money each month.
Once you have reached a certain amount they will offer anywhere from 20 to 30% of your balance to the creditor. Some even "claim" they can settle it for 10% and it will snow in FL this year which is about the same chance of them accepting 10%
So each month your sending them money instead of the credit cards your cards are going further and further past due which could result in them raising your interest rate also accruing late and possibly over the limit fees which will increase your balance.
Also once your cards start reporting past due on your credit the other cards will see this and raise your interest because your now "high risk and they mention this in their small print
Don't forget before your "balance" begins to build you have to pay their fee
lol can you tell I have a real issue with them.
My 20 + years in the credit industry I have never seen any of these settlement companies that were in it to help the consumer the only one that seems to benifit are their pockets.
I can definitely see that these companies rub you the wrong way which is good information for those of us that don't have that experience.
A lot of people jump in at the deep end and find out afterwards that these companies are only in it for themselves. By that time, it's too late to reverse the result. As you recommended, I did a couple of searches in the forum and found some good advice on ways to reduce credit card debt without breaking the bank or using consolidation loans which could also have a negative effect on your credit. Fortunately, I don't have a late problem but am looking at ways to maximize my credit score.
I've seen several advertisements on TV claiming to help people who have large amounts of credit card debt. They say that they can reduce the amount you owe to the CC companies to a fraction of the cost. How can this be true?? Is this some type of consolidation method? Has anyone ever used one of these companies and if so, what are the effects on your credit rating afterwards??
Hi - I agree with Karla all the way.
One cannot really reduce what one owes in credit card $$. But when it comes to collections there are reduced settlements. BUT don't do either. Know your right before you EVEN think about paying a collector or ask me first.
Back to topic...
I can refer you honestly to someone who I refer all the time. She really knows how to trim the fat. Accelerate your credit card payments and get rid of it. See danijohnson site and look at her War on Debt program. It works. Right now, in case you ever want to get a ccd again...go to site indebtwetrust and educate yourself. Spread the word too.
There are non-profit consumer credit counseling agencies out there that provide free budget and credit counseling, foreclosure prevention counseling, also free financial education seminars locally, and webinars on their web sites.
If you are late on payments and need to go on a debt management plan, they will charge you a nominal fee (usually under $50) and yes, it will effect your credit score - but creditors seem to be more forgiving with someone who is repaying their debt, than someone who is delinquent, or goes bankrupt.
I would not recommend going to a for-profit company to consolidate your debt. It will still negatively effect your credit, and it is costly!
Try to pay off your credit cards with the highest interest rate first, especially store cards like Macy's, etc. - double and triple pay if you can. Then, focus on the lower interest rates and you'll be debt free in no time. You can also call credit card companies and ask for a lower rate yourself. I negotiated a lower rate with Discover last year. What could it hurt?
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