Beware of "Credit Repair"
I was a credit counselor for a nonprofit credit counseling agency and heard about credit card "debt repair" solutions my clients had chosen that ended up being nightmares. It is not possible to "eliminate" or "cut by 50%" your debt, which was mostly credit card and medical debt in my clients' cases, and have no consequences. As they say, "If it sounds too good to be true, it usually is." If you speak to a salesperson at a debt consolidation company that isn't part of an accredited nonprofit organization, what they want you to do in order to get rid of your debt, is to stop paying on your cards and unsecured loans (like medical debt) and start depositing a certain amount of money into the consolidation company's coffers. They claim to be able to talk the creditors into accepting a lot less money as settlement of your debt. What they are really doing is waiting until your accounts are so delinquent that they go to a third-party collection agency who buys your debt from the original creditor at pennies on the dollar. During this time, by the way, your credit score is tanking. Then they use the money that you have been paying them every month to pay the collection agency an agreed upon amount per month until the debt is paid off. Unfortunately, it can take a long time for the account to be passed on to a collection agency, and some collection agencies won't deal with the consolidator. So as months and months go by, you think that your debt is being eliminated-problem solved. Actually, your credit score has suffered a beating very similar to filing for bankruptcy, some debt isn't being paid off at all in fact it is increasing because of the high interest rates being charged, and here's a real surprise- any debt that was "settled", say you owed $20,000 and you were able to cut it down to $10,000 through the consolidation program- Uncle Sam considers the $10,000 you didn't have to pay as INCOME and you will owe taxes on it. Frequently my clients who had been on a "credit repair" program ended up with more debt, a loss of the money paid to the consolidators and a horrific credit score. Bottom line: talk to an accredited counselor at a nonprofit counseling agency where there are programs that reduce your monthly interest and payments, and pay off ALL of your debt. If you are in real deep, income is down, debt is going up and this solution doesn't work either, the couselor may suggest bankruptcy. Your credit score will suffer and it will be on your report for 7-10 years, but your score will be awful anyway and you will have a fresh start with no tax liability.
This is my first post for the BLOGHER Community- It ended up being pretty longwinded!