A couple of years back, when my other half and I were still dating, she discussed to me that she owed about $10,000 in charge card debt ranging from a Speigel card to a House Depot card. About 5 charge card in all. She had actually just relocated with me into my townhouse and I provided to hold down the fort, economically, so that she might pay off those charge card. When a pay cut at work required her to cut down on those payments and she will default on a couple of them, she chose to answer among those TELEVISION or radio ads for credit therapy and debt combination. You understand the ones, "We can negotiate with your lenders and lower your payments, blah, blah, blah ...". Issue was, she never ever informed me that she was considering this. If she had, I would have assisted her to investigate these deals with her and we might have chosen a trustworthy one. Instead, she chose one from the radio or TELEVISION (I honestly can't keep in mind the name of the company but I make certain they are still out there) and registered for their debt management program.

So then she paid off all those credit cards, right?

Well, not precisely. First of all, let me discuss something about how the financial obligation management programs work. Many credit counseling companies will charge a setup charge when you enlist. The fraudsters will charge an extremely high, non-refundable quantity. By doing this, when they don't do what they guaranteed, and you opt-out of their program, they get to keep your registration fee. So anyhow, back to my partner's story. So as I was stating, she enrolled with this credit therapy business (even she can't remember the name, and she tossed out all the documentation so we can't look it up, sorry!) and exercised a monthly payment plan with them, about $250 per month. Once they receive her payment each month, they will disperse the cash to the 5 creditors that she noted when she registered. So when the very first payment came due, she bought a money order and mailed it out. Word of suggestions, money orders is essential because if you send a personal check, now "they" have your banking info. Constantly utilize money orders if you remain in the collection! If financial institutions or debt collection agency acquire your banking information, (bank name, account number, branch) they will take it all in one lump amount, whether you are paying or not! I have actually seen it done to great individuals that were trying to get their lives back in order.

So, my better half assumes that whatever is going great, why shouldn't she, right? Well, a number of months into the program, my other half gets a telephone call from one of the financial institutions, asking why she has actually not made a payment to them in a number of months. WHAT ??!! That's right, this lender had not gotten anything from the credit therapists. Not a single cent. It ends up that this credit counseling business liked to play favorites. And whatever creditor ranked higher on their buddy list, made money initially after the credit therapy company secured their extra monthly "administrative charges".

So did she ever settle her charge card?

I'm pleased to state that "WE" finally paid off her cards. I was so upset with the way my better half had been treated by these individuals that were expected to help, that I actioned in and assisted her pay whatever off. It took a bit, and some luck (a couple of the financial institutions offered a lump amount settlement, which we right away got on) however we lastly managed to pay whatever off.

So what's the ethical of the story?

Moral of the story, be extremely cautious who you work with! In this day and age, it is really easy for some con artist to set up a flashy site or run a radio ad assuring "You can be debt-free in just 2 weeks! Blah! Blah! Blah!"

If you are major about credit therapy because you believe that a financial obligation management program might benefit you, be really selective. Ask concerns! Just how much upfront? How much monthly? Do they get a percentage monthly? Do they pay every financial institution on your list on a monthly basis? Do they pay on time?

If you are still unsure, you can always consult your local Better Service Bureau to see if any grievances have actually been signed up against the company. Or you can look for a credible credit therapist at the National Structure For Credit Therapy's website, Their site is also readily available in Spanish. Another fantastic resource is the Association of Independent Customer Credit Counseling Agencies, which offers national accreditation to the credit therapy companies.

I believed I would answer a really common question about credit therapy companies here too, "Will credit counseling affect your credit score?" Unfortunately, I can't say "Yes" or "No". It actually depends upon the financial institution. Some lenders will in fact list you as paying on time (presuming you stay with the program), while others will report to the credit bureaus that your account remains in "Credit Therapy". When new lenders see the words "Credit Counseling", they will either shy away from extending new credit to you, or they will want to take a chance on you due to the fact that they appreciate the reality that you are on your way to getting your financial debt relief company yelp affairs in order. Every case is various. I can inform you that NOT paying your debts WILL hurt your credit rating.

The final credit therapy companies your buddy or foe? You choose! Choose carefully and weigh your options, and above all, buyer beware! Like anything else in life, if it sounds too great to be real, it probably is!