5 myths about credit counseling

July 5, 2013

Take the AICCCA 31-Day “Live Within Your Means” Challenge

-- but also suggests checking with the Better Business Bureau and your state attorney general's office for any unresolved complaints involving counseling agencies. That last one is particularly serious. Shady and sometimes criminal "debt relief" companies popped up during the recession and its aftermath, promising fixes that ranged from the fraudulent to the impossible. Even people who weren't snookered by such companies may know folks who were -- and that makes them wary, according to Cunningham. They're not sure of the differences among terms like credit counseling, debt management, debt settlement and credit repair. "There is a lot of consumer confusion out there," she says. "That's led to a lot of consumers who aren't willing to do anything to fix their finances." No easy solutions People should be wary because real financial fixes don't happen overnight , says MSN Money columnist Liz Weston. No secret loopholes exist to allow companies to solve your money woes instantly. Credit repair is not the same as credit counseling. Repair is for bringing up your credit score. Counseling is to help you pay off debt and get control of your finances. If all you want is to fix your FICO, Weston suggests these DIY resources: Experian Credit Educator: For $30 you'll get a 20-minute, one-on-one phone call with an agent who will walk you through "credit repair components" and offer information on credit management in general. (Take notes, and don't waste any of those 20 minutes with idle chitchat.) Credit counseling agencies: Weston recommends going through the NFCC for counselors in your area. Buy your FICO: Pay $20 at MyFICO.com to get an explanation of the reasons behind the number and suggestions for improving it. Reputable credit repair companies do exist, Weston notes. Ask mortgage professionals or real estate agents for referrals, and check the companies out with the Better Business Bureau. Don't sign with a company that asks for money upfront or refuses to provide a contract that spells out exactly what will be done, how long it will take and how much it will cost. Companies should also clearly explain your legal rights, and provide three days to cancel with no fee. "There are plenty of companies that will charge you a lot to do very little, or nothing at all," Weston says. "But some can provide a legitimate serviceby helping people through a process that they could do themselves, but may not want to." Doing it yourself It's possible to repair your own credit, over time, by squaring your debts and keeping your financial nose clean. But a credit counseling agency can ease the process -- especially if you're deeply indebted -- by negotiating those lower interest rates and fees. With that kind of help, repayment should be less stressful and faster. "Faster," however, is a relative term. It will take time. Depending on how much you owe, it could take up to several years to satisfy your financial obligations. It works only if you work it. One of the things you'll have to do if you go through an agency is cut up your credit cards -- and sometimes that really hurts.
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Logo: Couple talking to bank manager (Image Source, Getty Images) Learning to live within ones means is a valuable money management skill, said David Jones, President, AICCCA. If consumers who may be struggling could accomplish this challenge for one month, they will be well on their way to a brighter future. AICCCA offers three steps to get started with the challenge: 1.Spend less than you make. Look at your net income versus your expenses. Your necessary expenses of mortgage or rent, food for your family, utilities, medical needs and transportation costs come first. Also account for credit card and loan installment payments. Remember that some expenses, like food and gas, can vary depending on the choices you make. 2.Dont reach for a credit card. During the challenge, try not to use your credit cards at all. If you do, be sure that you can pay off the charge within 30 days. 3.Start saving something. For consumers who are unaccustomed to saving, starting small is a good first step. Even $5 or $10 a month will add up over time. Your ultimate goal should be to save 10 to 15 percent of your net income. You should also save separately for periodic expenses that are not paid monthly but you know will come up, like auto tag renewals. At the end of the credit card debt month, evaluate how you did. If you had trouble meeting the challenge, you might benefit from the services of a qualified credit counseling agency. Call 866-703-8787 or visit http://www.aiccca.org to find an AICCCA member office to serve you. AICCCA: Founded in 1993, Association of Independent Consumer Credit Counseling Agencies is a national membership organization established to promote quality and professional delivery of credit counseling services. AICCCA and its members are focused on financial education, efficient processes and advanced technology to best serve clients and creditors. AICCCA members are independent nonprofit agencies that advocate for debtors, annually counsel millions of consumers nationwide and provide debt management services to consumers with excessive unsecured debt. To contact an AICCCA member agency call (866) 703-TRUSTAICCCA (866-703-8787) or visit http://www.aiccca.org . Read the full story at http://www.prweb.com/releases/2013/7/prweb10887932.htm Top News
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