Credit Counseling/Debt Settlement Scams To Steer Clear Of

About ten years ago, I found myself in severe credit card debt. I was young and didn't have a proper understanding on how to use credit responsibly, but a big part of the problem came when I lost my job in 2002 and had to live off of my cards for several months. I took a commission sales job because I could not find anything else and was not reimbursed for any of my expenses. By the time I got a decently-paying job, I'd already gotten to the point where my accounts were frozen and collection agencies had me on speed dial. I turned to a debt settlement agency that promised to be able to negotiate with my creditors so that I would end up paying less than what I really owed. By the time I realized that my fees were going nowhere and that I'd been 'taken for a ride', I had no other option but Chapter 7 bankruptcy. While bankruptcy turned out to be much better than I thought it would be, here are some agency warning signs I wish I'd known about.

-This may seem obvious, but steer clear of an agency that is reluctant to give you a business name and address. 'Scammish' companies usually don't give these so they can avoid being detected by law enforcement and other 'watchdog' agencies.

-If an agency claims to be able to get you out of debt 'quickly and easily', think twice. There is nothing 'quick' or 'easy' about getting out of debt; it takes significant changes to your spending habits as well as strict budgets and proper understanding of credit. If you're promised a 'quick fix' to your credit problems, steer clear.

-If a company claims to be able to remove bankruptcies or negative information from your credit report, walk away. It's one thing if the information is false or the result of identity theft, but things that are true and legitimate cannot be removed from a credit report. There may be an 'expiration date' (10 years for Chapter 7, 7 for Chapter 13) for certain information, but there is no legal way to remove it.

-Consider the fees an agency charges, if any. If they are too high for you or are called 'voluntary contributions', steer clear. Also, some states do not allow agencies to charge for their services at all; North Carolina (where I lived at the time) is one of those states. Check the laws in your state.

-If they claim they can lower your balance or payments by a significant margin, be wary. This is rarely, if ever, true.

-Reputable agencies will never insist on an immediate decision or claim to be able to give you advice over the phone. Instead, they will sit down with you to discuss your particular situation and give you tailored advice. They will also give you time to think about your needs and check out other companies. You don't want to wait too long because issues like these are time-sensitive, but you should never feel as though you have to decide right away.

These are tough times we live in; the bleak outlook many of us have regarding our finances can make us 'easy prey' for scammers. Most credit counseling agencies are 'kosher' and are really there to help people get out of debt. However, it helps to know what to look for when it comes to those that aren't. 

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