Do you Know the Difference?

Do you know the difference between Debt Settlement/Negotiation, Credit Repair and Credit Counseling?
Do you know that Debt Settlement may be reported to the IRS as forgiven debt that can be considered taxable income? Some Credit Repair companies claim to be able to remove all your bad credit. Do you know that no one can legally remove accurate and timely negative information permanently from a credit report?

Debt Settlement/Negotiation, Credit Repair & Credit Counseling Excerpts from the Federal Trade Commission

DEBT NEGOTIATION/SETTLEMENT 
http://www.ftc.gov/bcp/conline/pubs/credit/fiscal.pdf  - Beginning page 5

The Claims:  Debt negotiation firms may claim they’re nonprofit.  They also may claim that they can arrange for your unsecured debt – typically, credit card debt – to be paid off for anywhere from 10 to 50 percent of the balance owed.

The firms often pitch their services as an alternative to bankruptcy.  They may claim that using their services will have little or no negative impact on your ability to get credit in the future, or that any negative information can be removed from your credit report when you complete the debt negotiation program.  The firms usually tell you to stop making payments to your creditors and instead, send your payment to the debt negotiation company.  The firms may promise to hold your funds in a special account and pay the creditor on your behalf.

The Truth:  Just because a debt negotiation company describes itself as a “non profit” organization, there’s no guarantee that the services they offer are legitimate.  There also is no guarantee that a creditor will accept partial payment of a legitimate debt.  In fact, if you stop making payments on a credit card, late fees and interest usually are added to the debt each month.  If you exceed your credit limit, additional fees and charges also can be added.  All this can quickly cause a consumer’s original debt to double or triple.  What’s more, most debt negotiation companies charge consumers substantial fees for their services, including a fee to establish the account with the debt negotiator, a monthly service fee, and a final fee of a percentage of the money you’ve supposedly saved.

While creditors have no obligation to agree to negotiate the amount a consumer owes, they have a legal obligation to provide accurate information to the credit reporting agencies, including your failure to make monthly payments.  That can result in a negative entry on your credit report.  And in certain situations, creditors may have the right to sue you to recover the money you owe.  In some instances, when creditors win a lawsuit, they have the right to garnish your wages or put a lien on your home.  Finally, the Internal Revenue Service may consider any amount of forgiven debt to be taxable income.

CREDIT REPAIR http://www.ftc.gov/bcp/conline/pubs/credit/repair.pdf

The Claims:  You see the advertisements in the newspapers, on TV, and on the internet.  You hear them on the radio.  You get fliers in the mail.  You may even get calls from telemarketers offering credit repair services.  They all make the same claims:

• “Credit problems?  No problem!”
• “We can erase your bad credit – 100% guaranteed!”
• “Create a new credit identity – legally!” **
• “We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!”

**  Companies that advise you to dispute all information in your credit report or take any action that seems illegal, like creating a new credit identity.  If you follow illegal advice and commit fraud, you may be subject to prosecution.

Do yourself a favor and save some money, too.  Don’t believe these statements.  Only time, a conscious effort, and a personal debt repayment plan will improve your credit report.

The Scam:  Everyday, companies appeal nationwide to consumers with poor credit histories.  They promise, for a fee, to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job.  The truth is - they can't deliver.  After you pay them hundreds or thousands of dollars in fees, these companies do nothing to improve your credit report; most simply vanish with your money.

The Truth:  No one can legally remove accurate and timely negative information from a credit report.  The law allows you to ask for an investigation of information in your file that you dispute as inaccurate or incomplete.  There is no charge for this.  Everything a credit repair clinic can do for you legally, you can do for yourself at little or no cost.  This is in accordance to the Fair Credit Reporting Act.  For more information, see how to dispute credit report errors at http://bulkorder.ftc.gov:10937/index.php?intro=1

CREDIT COUNSELING  http://www.ftc.gov/bcp/conline/pubs/credit/fiscal.pdf  - Pages 1 through 4

Many credit counseling organizations are nonprofit and work with you to solve your financial problems.  But beware – just because an organization says it is nonprofit doesn’t guarantee that its services are free or affordable, or that its services are legitimate.  In fact, some credit counseling organizations charge high fees, some of which may be hidden, or urge consumers to make “voluntary” contributions that cause them to fall deeper into debt.

Choosing a Credit Counseling Organization:  Reputable credit counseling organizations advise you on managing your money and debts, help you develop a budget and usually offer free educational materials and workshops.  Their counselors are certified and trained in the areas of consumer credit, money and debt management, and budgeting.  Counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems.  An initial counseling session typically last an hour, with an offer of follow-up sessions.

A reputable credit counseling agency should send you free information about itself and the services it provides without requiring you to provide any details about your situation.  If a firm doesn’t do that, consider it a red flag and go elsewhere for help.

Once you’ve developed a list of potential counseling agencies, check them out with your state Attorney General, local consumer protection agency, and Better Business Bureau.  They can tell you if consumers have filed complaints about them.  The United States Trustee Program also keeps a list of credit counseling agencies that have been approved to provide pre-bankruptcy counseling.

Now that you have finished the reading above, click on ABOUT US to read about the service that Consumer Credit Counseling Service of North Central Texas provides.  We have over 55 years of experience nation wide and nearly 30 years right here in Texas.  Check us out; we are who we say we are…