More News on Spreading Credit Repair and Assistance Scams
Credit repair scams and mortgage assistance scams is growing problem for individual and the federal regulatory authorities. The best way for individuals to tackle credit repair scams is to report misconduct including any promises or demands that are not legal credit repair practices to the appropriate authorities.
The FTC enforces credit report and credit repair regulations but it does not investigate individual claims against a company, however they will investigate a company for legal violations. The Federal Trade Commission ( FTC ) files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the FTC that a proceeding is in the public interest.
If any company charges for free credit evaluations or consultations, or charges for credit repair services that were never received, they should be reported so appropriate action can be taken to put an end to fraudulent and deceptive credit businesses.
In a recent press release by the FTC action was taken to stop the practices of a credit counseling business. Crossland Credit Consulting Corp. and its co-defendants allegedly operated deceptive mortgage refinancing, credit repair, and loan modification schemes.
According to the FTC complaint, the company and defendants falsely promised to use proceeds from mortgage refinances to promptly pay off consumers’ original loans, but often pocketed the money instead. They misrepresented that they would repair consumers’ credit records by removing truthful negative items from their credit reports so they could obtain mortgage loans, and charged advance fees for those services in violation of both the Credit Repair Organizations Act and the Telemarketing Sales Rule. They also falsely claimed that they would modify consumers’ mortgages to obtain substantially lower interest rates and monthly payments. The court immediately barred the practices and froze the defendants’ assets pending a hearing.
Consumers should be careful when any company wants money up front for their services. Credit repair scams have become recognized for their abusive practices in taking money up front from consumers with promises of credit report and credit score assistance and disappearing with the funds without improving the consumers credit history or credit score. This problem now applies to mortgage assistance and foreclosure assistance services.
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. In each case of wrongdoing, the FTC is asking the court to stop the defendants’ deceptive claims and make them forfeit their ill-gotten gains.
The Federal Credit Repair Organizations Act – Full Text
The Federal Credit Repair Organizations Act prohibits a variety of false and misleading statements, as well as fraud by credit repair organizations. The Federal Trade Commission as well as the individual states, enforces The Federal Credit Repair Organizations Act.
The Federal Trade Commission’s Bureau of Consumer Protection works for the consumer to prevent fraud, deception, and unfair business practices in the marketplace. This federal government department protects consumers from deceptive and unfair practices in the financial services industry, including protecting consumers from predatory or discriminatory lending practices, as well as deceptive or unfair loan servicing, debt collection, and credit counseling or other debt assistance practices. The Division of Financial Practices within the Federal Trade Commission’s Bureau of Consumer Protection takes action against companies that violate the law when collecting debts, marketing debt reduction or relief services, and offering credit counseling services.
The Federal Credit Repair Organizations falls under the Federal Trade Commission’s jurisdiction.
The full text of the Federal Credit Repair Organizations Act:
Title IV of the Consumer Credit Protection Act (Public Law 90-321, 82 Stat. 164)
TITLE IV–CREDIT REPAIR ORGANIZATIONS
SEC. 401. SHORT TITLE.
This title may be cited as the ‘Credit Repair Organizations Act’.
SEC. 402. FINDINGS AND PURPOSES.
(a) Findings.–The Congress makes the following findings:
(1) Consumers have a vital interest in establishing and maintaining their credit worthiness and credit standing in order to obtain and use credit. As a result, consumers who have experienced credit problems may seek assistance from credit repair organizations which offer to improve the credit standing of such consumers. (2) Certain advertising and business practices of some companies engaged in the business of credit repair services have worked a financial hardship upon consumers, particularly those of limited economic means and who are inexperienced in credit matters.
(b) Purposes.–The purposes of this title are—
(1) to ensure that prospective buyers of the services of credit repair organizations are provided with the information necessary to make an informed decision regarding the purchase of such services; and (2) to protect the public from unfair or deceptive advertising and business practices by credit repair organizations.
SEC. 403. DEFINITIONS.
For purposes of this title, the following definitions apply:
(1) Consumer. — The term ‘consumer’ means an individual.
(2) Consumer credit transaction. — The term ‘consumer credit transaction’ means any transaction in which credit is offered or extended to an individual for personal, family, or household purposes.
(3) Credit repair organization. — The term ‘credit repair organization’—
(A) means any person who uses any instrumentality of interstate commerce or the mails to sell, provide, or perform (or represent that such person can or will sell, provide, or perform) any service, in return for the payment of money or other valuable consideration, for the express or implied purpose of–
(i) improving any consumer’s credit record, credit history, or credit rating; or
(ii) providing advice or assistance to any consumer with regard to any activity or service described in clause (i); and
(B) does not include–
(i) any nonprofit organization which is exempt from taxation under section 501(c)
(3) of the Internal Revenue Code of 1986;
(ii) any creditor (as defined in section 103 of the Truth in Lending Act), with respect to any consumer, to the extent the creditor is assisting the consumer to restructure any debt owed by the consumer to the creditor; or
(iii) any depository institution (as that term is defined in section 3 of the Federal Deposit Insurance Act) or any Federal or State credit union (as those terms are defined in section 101 of the Federal Credit Union Act), or any affiliate or subsidiary of such a depository institution or credit union.
(4) Credit.–The term ‘credit’ has the meaning given to such term in section 103(e) of this Act.
SEC. 404. PROHIBITED PRACTICES.
(a) In General.–No person may—
(1) make any statement, or counsel or advise any consumer to make any statement, which is untrue or misleading (or which, upon the exercise of reasonable care, should be known by the credit repair organization, officer, employee, agent, or other person to be untrue or misleading) with respect to any consumer’s credit worthiness, credit standing, or credit capacity to– (A) any consumer reporting agency (as defined in section 603(f) of this Act); or
(B) any person–
(i) who has extended credit to the consumer; or
(ii) to whom the consumer has applied or is applying for an extension of credit;
(2) make any statement, or counsel or advise any consumer to make any statement, the intended effect of which is to alter the consumer’s identification to prevent the display of the consumer’s credit record, history, or rating for the purpose of concealing adverse information that is accurate and not obsolete to–
(A) any consumer reporting agency;
(B) any person–
(i) who has extended credit to the consumer; or (ii) to whom the consumer has applied or is applying for an extension of credit;
(3) make or use any untrue or misleading representation of the services of the credit repair organization; or
(4) engage, directly or indirectly, in any act, practice, or course of business that constitutes or results in the commission of, or an attempt to commit, a fraud or deception on any person in connection with the offer or sale of the services of the credit repair organization.
(b) Payment in Advance.–No credit repair organization may charge or receive any money or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform for any consumer before such service is fully performed.
SEC. 405. DISCLOSURES.
(a) Disclosure Required.–Any credit repair organization shall provide any consumer with the following written statement before any contract or agreement between the consumer and the credit repair organization is executed:
‘Consumer Credit File Rights Under State and Federal Law
You have a right to dispute inaccurate information in your credit report by contacting the credit bureau directly. However, neither you nor any ”credit repair” company or credit repair organization has the right to have accurate, current, and verifiable information removed from your credit report. The credit bureau must remove accurate, negative information from your report only if it is over 7 years old. Bankruptcy information can be reported for 10 years.
You have a right to obtain a copy of your credit report from a credit bureau. You may be charged a reasonable fee. There is no fee, however, if you have been turned down for credit, employment, insurance, or a rental dwelling because of information in your credit report within the preceding 60 days. The credit bureau must provide someone to help you interpret the information in your credit file. You are entitled to receive a free copy of your credit report if you are unemployed and intend to apply for employment in the next 60 days, if you are a recipient of public welfare assistance, or if you have reason to believe that there is inaccurate information in your credit report due to fraud.
You have a right to sue a credit repair organization that violates the Credit Repair Organization Act. This law prohibits deceptive practices by credit repair organizations.
You have the right to cancel your contract with any credit repair organization for any reason within 3 business days from the date you signed it.
Credit bureaus are required to follow reasonable procedures to ensure that the information they report is accurate. However, mistakes may occur.
You may, on your own, notify a credit bureau in writing that you dispute the accuracy of information in your credit file. The credit bureau must then reinvestigate and modify or remove inaccurate or incomplete information. The credit bureau may not charge any fee for this service. Any pertinent information and copies of all documents you have concerning an error should be given to the credit bureau.
If the credit bureau’s reinvestigation does not resolve the dispute to your satisfaction, you may send a brief statement to the credit bureau, to be kept in your file, explaining why you think the record is inaccurate. The credit bureau must include a summary of your statement about disputed information with any report it issues about you.
The Federal Trade Commission regulates credit bureaus and credit repair organizations. For more information contact:
The Public Reference Branch
Federal Trade Commission
Washington, D.C. 20580′.
(b) Separate Statement Requirement.–The written statement required under this section shall be provided as a document which is separate from any written contract or other agreement between the credit repair organization and the consumer or any other written material provided to the consumer.
(c) Retention of Compliance Records.—
(1) In general.–The credit repair organization shall maintain a copy of the statement signed by the consumer acknowledging receipt of the statement.
(2) Maintenance for 2 years.–The copy of any consumer’s statement shall be maintained in the organization’s files for 2 years after the date on which the statement is signed by the consumer.
SEC. 406. CREDIT REPAIR ORGANIZATIONS CONTRACTS.
(a) Written Contracts Required.–No services may be provided by any credit repair organization for any consumer—
(1) unless a written and dated contract (for the purchase of such services) which meets the requirements of subsection
(b) has been signed by the consumer; or
(2) before the end of the 3-business-day period beginning on the date the contract is signed.
(b) Terms and Conditions of Contract.–No contract referred to in subsection
(a) meets the requirements of this subsection unless such contract includes (in writing)—
(1) the terms and conditions of payment, including the total amount of all payments to be made by the consumer to the credit repair organization or to any other person;
(2) a full and detailed description of the services to be performed by the credit repair organization for the consumer, including—
(A) all guarantees of performance; and
(B) an estimate of– (i) the date by which the performance of the services (to be performed by the credit repair organization or any other person) will be complete; or (ii) the length of the period necessary to perform such services;
(3) the credit repair organization’s name and principal business address; and
(4) a conspicuous statement in bold face type, in immediate proximity to the space reserved for the consumer’s signature on the contract, which reads as follows: ‘You may cancel this contract without penalty or obligation at any time before midnight of the 3rd business day after the date on which you signed the contract. See the attached notice of cancellation form for an explanation of this right.’.
SEC. 407. RIGHT TO CANCEL CONTRACT.
(a) In General. — Any consumer may cancel any contract with any credit repair organization without penalty or obligation by notifying the credit repair organization of the consumer’s intention to do so at any time before midnight of the 3rd business day which begins after the date on which the contract or agreement between the consumer and the credit repair organization is executed or would, but for this subsection, become enforceable against the parties.
(b) Cancellation Form and Other Information. — Each contract shall be accompanied by a form, in duplicate, which has the heading ‘Notice of Cancellation’ and contains in bold face type the following statement:
‘You may cancel this contract, without any penalty or obligation, at any time before midnight of the 3rd day which begins after the date the contract is signed by you.
To cancel this contract, mail or deliver a signed, dated copy of this cancellation notice, or any other written notice to (name of credit repair organization) at (address of credit repair organization) before midnight on (date)
I hereby cancel this transaction,
( date )
( purchaser’s signature ).’.
(c) Consumer Copy of Contract Required.–Any consumer who enters into any contract with any credit repair organization shall be given, by the organization—
(1) a copy of the completed contract and the disclosure statement required under section 405; and (2) a copy of any other document the credit repair organization requires the consumer to sign, at the time the contract or the other document is signed.
SEC. 408. NONCOMPLIANCE WITH THIS TITLE.
(a) Consumer Waivers Invalid.–Any waiver by any consumer of any protection provided by or any right of the consumer under this title—
(1) shall be treated as void; and
(2) may not be enforced by any Federal or State court or any other person.
(b) Attempt To Obtain Waiver.–Any attempt by any person to obtain a waiver from any consumer of any protection provided by or any right of the consumer under this title shall be treated as a violation of this title.
(c) Contracts Not in Compliance.–Any contract for services which does not comply with the applicable provisions of this title—
(1) shall be treated as void; and
(2) may not be enforced by any Federal or State court or any other person.
SEC. 409. CIVIL LIABILITY.
(a) Liability Established.–Any person who fails to comply with any provision of this title with respect to any other person shall be liable to such person in an amount equal to the sum of the amounts determined under each of the following paragraphs:
(1) Actual damages.–The greater of–
(A) the amount of any actual damage sustained by such person as a result of such failure; or
(B) any amount paid by the person to the credit repair organization.
(2) Punitive damages.–
(A) Individual actions.–In the case of any action by an individual, such additional amount as the court may allow.
(B) Class actions.–In the case of a class action, the sum of–
(i) the aggregate of the amount which the court may allow for each named plaintiff; and
(ii) the aggregate of the amount which the court may allow for each other class member, without regard to any minimum individual recovery.
(3) Attorneys’ fees.–In the case of any successful action to enforce any liability under paragraph (1) or (2), the costs of the action, together with reasonable attorneys’ fees.
(b) Factors to Be Considered in Awarding Punitive Damages.–In determining the amount of any liability of any credit repair organization under subsection (a)(2), the court shall consider, among other relevant factors—
(1) the frequency and persistence of noncompliance by the credit repair organization;
(2) the nature of the noncompliance;
(3) the extent to which such noncompliance was intentional; and
(4) in the case of any class action, the number of consumers adversely affected.
SEC. 410. ADMINISTRATIVE ENFORCEMENT.
(a) In General.–Compliance with the requirements imposed under this title with respect to credit repair organizations shall be enforced under the Federal Trade Commission Act by the Federal Trade Commission.
(b) Violations of This Title Treated as Violations of Federal Trade Commission Act.—
(1) In general. — For the purpose of the exercise by the Federal Trade Commission of the Commission’s functions and powers under the Federal Trade Commission Act, any violation of any requirement or prohibition imposed under this title with respect to credit repair organizations shall constitute an unfair or deceptive act or practice in commerce in violation of section 5(a) of the Federal Trade Commission Act.
(2) Enforcement authority under other law. — All functions and powers of the Federal Trade Commission under the Federal Trade Commission Act shall be available to the Commission to enforce compliance with this title by any person subject to enforcement by the Federal Trade Commission pursuant to this subsection, including the power to enforce the provisions of this title in the same manner as if the violation had been a violation of any Federal Trade Commission trade regulation rule, without regard to whether the credit repair organization–
(A) is engaged in commerce; or
(B) meets any other jurisdictional tests in the Federal Trade Commission Act.
(c) State Action for Violations.—
(1) Authority of states. — In addition to such other remedies as are provided under State law, whenever the chief law enforcement officer of a State, or an official or agency designated by a State, has reason to believe that any person has violated or is violating this title, the State–
(A) may bring an action to enjoin such violation;
(B) may bring an action on behalf of its residents to recover damages for which the person is liable to such residents under section 409 as a result of the violation; and
(C) in the case of any successful action under subparagraph (A) or (B), shall be awarded the costs of the action and reasonable attorney fees as determined by the court.
(2) Rights of commission.–
(A) Notice to commission.–The State shall serve prior written notice of any civil action under paragraph
(1) upon the Federal Trade Commission and provide the Commission with a copy of its complaint, except in any case where such prior notice is not feasible, in which case the State shall serve such notice immediately upon instituting such action.
(B) Intervention.–The Commission shall have the right–
(i) to intervene in any action referred to in subparagraph (A);
(ii) upon so intervening, to be heard on all matters arising in the action; and
(iii) to file petitions for appeal.
(3) Investigatory powers. — For purposes of bringing any action under this subsection, nothing in this subsection shall prevent the chief law enforcement officer, or an official or agency designated by a State, from exercising the powers conferred on the chief law enforcement officer or such official by the laws of such State to conduct investigations or to administer oaths or affirmations or to compel the attendance of witnesses or the production of documentary and other evidence.
(4) Limitation. — Whenever the Federal Trade Commission has instituted a civil action for violation of this title, no State may, during the pendency of such action, bring an action under this section against any defendant named in the complaint of the Commission for any violation of this title that is alleged in that complaint.
SEC. 411. STATUTE OF LIMITATIONS.
Any action to enforce any liability under this title may be brought before the later of– (1) the end of the 5-year period beginning on the date of the occurrence of the violation involved; or (2) in any case in which any credit repair organization has materially and willfully misrepresented any information which– (A) the credit repair organization is required, by any provision of this title, to disclose to any consumer; and (B) is material to the establishment of the credit repair organization’s liability to the consumer under this title, the end of the 5-year period beginning on the date of the discovery by the consumer of the misrepresentation.
SEC. 412. RELATION TO STATE LAW.
This title shall not annul, alter, affect, or exempt any person subject to the provisions of this title from complying with any law of any State except to the extent that such law is inconsistent with any provision of this title, and then only to the extent of the inconsistency.
SEC. 413. EFFECTIVE DATE.
This title shall apply after the end of the 6-month period beginning on the date of the enactment of the Credit Repair Organizations Act, except with respect to contracts entered into by a credit repair organization before the end of such period.”.
1. Pub. L. No. 104-208, 110 Stat. 3009 (Sept. 30, 1996). The amendments to the credit statutes are in Title II of the Act, entitled “Economic Growth and Regulatory Paperwork Reduction.” The footnotes in this copy of the Act are not part of the Act, but are cross-references inserted by the FTC staff for the convenience of the reader.
2. To be codified as 15 U.S.C. § 1679.
3. To be codified as 15 U.S.C. § 1679a.
4. To be codified as 15 U.S.C. § 1679b.
5. Truth in Lending Act § 103(f) states in pertinent part: “The term ‘creditor’ refers only to creditors who regularly extend, or arrange for the extension of, credit which is payable by agreement in more than four installments or for which the payment of a finance charge is or may be required, whether in connection with loans, sales pf property or services, or otherwise. . . .”
6. TILA § 103(e) states: “The term ‘credit’ means the right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment.”
7. To be codified as 15 U.S.C. § 1679c.
8. Fair Credit Reporting Act (FCRA) § 603(f) states: “The term ‘consumer reporting agency’ means any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports.”
Credit Counseling Agency Cautions
Using a reputable credit counseling organization can help some consumers get back on track with their financial obligations and help manage their budget better. Better financial management of existing debts will certainly help improve an individual’s credit history and credit score. But, credit counseling services are often not the solution they are advertised to be.
Credit counselors should provide advice to consumers regarding managing money and debts, help develop a workable budget, and offer various educational materials to help the consumer gain control of their finances. Credit counselors can help develop a personalized plan to solve that helps to solve a variety of money problems. Unfortunately, too many credit counselors charge a fee and provide very little substantive assistance to consumers that need financial help.
To avoid working with a credit counseling organization that provides little assistance, there are some questions you should ask before choosing a credit counselor.
Ask that the credit counseling organization to send or provide material regarding their services in advance. Find out if they offer any educational materials for free. Do not provide account numbers and personal finance information other than your name and address before any counseling agency will agree to send you information about their services. Avoid organizations that charge for information.
What kinds of counseling, debt management and educational programs does the counseling organization provide? It is always best to work with a credit counseling organization that provides a range of services, including budget counseling, and savings and debt management classes. Educational information is good but most consumers need relief and help form the debt and credit problems. The FTC recommends that consumers avoid organizations that primarily push a debt management plan (DMP).
Check and see if there are any upfront fees for the services and what all of the costs will be for the program offered. Some agencies charge up front fees for their debt management programs and other services. These fees may be so high that getting assistance is more costly than it is beneficial. Get specific information on fees in writing before going forward.
Is there a written agreement or contract for the services rendered? Don’t sign anything without reading it first. Make sure all promises and services to be performed are in writing.
What kind of training do they have for their staff and what qualifications do they posses to assist the consumers? A good counseling agency provides its counselors with regular training. Ask if they accredited or certified by an outside organization? Do they work with lawyers, certified financial planners, and other professionals?
If you are using a debt management component of the counseling services, ask if you will receive regular updates and reports regarding your account status? Within the debt management program, find out how often the creditors are paid. Ask if the credit counselor will be able to help with all of your debts? Some agencies offer little assistance for secured debts like car payments or mortgages, or government debts like taxes and student loans. Make sure you receive the right service for your needs.
What kinds of measures are used to protect your information? Check to see that the credit counseling organization has some process to keep your financial information and identity confidential and secure. Be sure you know the agency’s privacy policy. It is important that the agency you select has sufficient security in place to protect your confidential information.
Be careful with any credit counseling organization that guarantees they will be able to remove your debts or promise that these debts will be paid off for far less than you owe ( debt reductions are likely but no firm can assure it will happen ) or organizations that require large monthly fees or upfront fees or promise that using their system will have no negative impact on your credit report or claim that they can remove accurate negative information from your credit report. Credit help and credit score help shouldn’t cost an arm and a leg.
Handling Credit and Credit Score Problems
Credit has become an almost indispensable tool in our society. Almost everyone uses some form of credit whether it is in the form of credit cards, car loans or mortgages. Credit allows us to purchase goods and services by paying for them later which can be very convenient to buy big ticket items or stretch our monthly budget. But credit can cause money problems if not managed wisely.
Money problems are often the immediate result of too much debt with unmanageable monthly payments. But money problems can also be compounded because of credit issues as result of unmanageable debt payments. The debt payment burden can be enough to worry about and try to manage but future money problems are sure to come as a result of a declining credit score and deteriorating credit history.
The first approach to help curtail future credit problems is to understand you have a credit and debt predicament. As simple as this sounds, far too many consumers ignore the warning signs and don’t handle their credit problems in their infancy but rather wait until the burden of bad credit and delinquent payments devastate their lives and relationships.
Some of the early warning signs of credit problems include:
You pay only the lowest amount due each month on your credit cards or other revolving credit lines.
You use your savings to pay bills.
You often get past due notices that include late fees.
You pay bills after the due date or skip payments.
You take out new loans or charge on credit cards to pay for basic living expenses.
You often use more debt to cover expenses or pay bills.
Collection agencies frequently call regarding past due obligations.
You are turned down for credit because of a poor credit history and low credit score.
The best advice to avoid the path of too much debt and a deteriorating credit report is to know in advance how much you can afford to commit to monthly credit payments. Monthly credit payments should not consume more than 15% of an individual or family income excluding the housing payment. Once debt payments pass this threshold, it is time to assess how severe your credit and debt issues have become and start a remedial course of action.
Before you approach monthly debt payments that are too hard to handle, credit should be limited to use for necessary purchases where the use of credit might have added attributes or for the purchase of assets. For example, credit can be used for purchase with a credit card where the protection afforded by a credit card service can be valuable or credit could be used for the purchase of an asset like a home. Credit for everyday consumption and shopping will always lay the ground work for future debt problems and credit score problems.
Once the debt amount and monthly payments grow out of control, getting out of that debt becomes harder and harder. With a plan of action and some discipline almost any debt problem and credit score can be fixed. The days of a debtor prison no longer exist. A good budget with some curtailed spending is the number one tool to getting debt under control and starting a path of a good credit score. But other options are available such as bankruptcy, debt consolidation loans and credit counseling.
The goal should be to understand the problem including the amount of debt, your income and expense position and set up a plan that can work for you. Begin by making a budget. Determine what you owe and what your monthly expenses are. This will help determine whether a good budget and a thrifty lifestyle can remedy the problem or more drastic action needs to be taken.
If the budget process is not enough, calculate out how much you can realistically afford to pay each creditor and approach the creditors to see if they will accept a lower amount or reduce the interest rate on the debts.
A debt consolidation may be another alternative. Be careful not to obtain a debt consolidation that only places you in a worse financial position. A debt consolidation loan used to pay off credit cards and other loans may be a possible solution but it may cost more in the long run.
The possibility of bankruptcy either with a Chapter 13 repayment plan or Chapter 7 should not be ignored when the debt levels are quite high. This decision should not be taken lightly but the stigma of bankruptcy really no longer exists so this option should also not be ignored.
Credit counseling is another option to consider. A good non profit credit counseling company can help work with your creditors to reduce the interest rates and possibly the amount owed and make a plan to get out of debt.
The two important considerations are to avoid using debt for transactions they should not involve the extension of credit and once credit trouble starts, nip it in the bud early no matter what method is used. No matter where you stand now, a good credit history and good credit score should be a goal to improve your lifestyle.
Repairing bad credit and a bad credit score is easier than most consumers believe. Disputing inaccuracies frequently removes more than just the inaccuracy, which often leads to an improved credit score. Secured credit cards and prepaid credit cards are quick and easy tools that can be used to rebuild credit. Prepaid credit cards generally do not require a credit report check and the credit card payment history will be reported to the credit reporting agencies to build a history and improve your credit score.
Fixing a bad credit score and high debt payments may not be easy but it is easier than those confronted with this condition often believe. Ignoring the problem will certainly not help; get debt help and credit score help now to start a path for a better lifestyle.
Credit Score Help and Non Profit Debt Consolidation Programs
For some individuals, trying to improve their credit score and credit history can be a difficult task. Often the problem of improving a credit score is that the cause of the problem or low credit score has not be fixed. For these individuals, fixing the cause of the delinquent debt and bills, which is the predominant factor used to calculate a credit score is the number one issue to address.
The delinquent debt payments are often the result of a mismatched budget. One of the best solutions is to get the monthly budget back in order. Unfortunately, solving budget problems is no easy matter.
A starting point for individuals that have too many monthly payments and not enough income to handle these payments is to seek the help of a non profit credit counseling company and consolidate the debt payments.
It is important to realize, the term ‘non profit’ does not mean free. Non profit simply means that the entity is not established for a pure profit motive but generates revenue to pay for its expenses and may use donations to further their business. Being non profit does not make them a better choice when it comes to helping you consolidate your debts. You should always do your homework and find the company and program that is right for you. Get a few quotes before you decide.
The idea of a non profit debt consolidation program should be to help the consumer become educated about how credit works and provide counseling to help them handle their finances. They also provide services to lower the existing debt and work with creditors to lower your monthly payments. In many cases, you will pay one monthly sum to them and they will disburse payments to your creditors. There will be a fee for this service which will be added to your payment to them each month.
We all know how easy it can be to get off track and spend a bit more than we can afford to have a decently comfortable life. There are times when we don’t realize just how much credit card companies charge in interest and late fees. A non profit debt consolidation program will work with your creditors to reduce or eliminate late payment charges and delinquent fees. If our credit becomes damaged we are really in a financial pickle. Without good credit and a good credit score most consumers will be unable to get a mortgage to purchase a home, get any type of loan for that new vehicle, borrow money for their child’s education, or possibly have trouble with a new job interview..
Non profit debt consolidation programs may help you get out of debt and become more educated about debt and how it affects your life, and teach you how to stay debt free. This will hopefully show you how to avoid financial problems in the future. You will receive one-on-one advice from a certified credit counselor who will work with you and your budget to design a payment plan that is unique to your situation. Credit counselors know the particulars of creditor’s rules and policies. This gives them an inside track when it comes to negotiating with your creditors.
Do your research to make sure you are using the right counseling agency and have everything explained up front before committing your self to the process. Debt counseling and consolidations are not easy escapes from responsibility.
The credit counseling agency combined with a debt consolidation may very well provide relief from burdensome debt payments that hurt your credit profile, your credit score and your well being. If you find that you are in debt up to your ears, there had to have been a reason you find yourself in this situation. Perhaps you had a medical emergency and you were unable to meet most of your bills because of the high cost of health care or were not able to work for several months. Maybe the fault wasn’t yours entirely, a spouse or child ran up the credit cards beyond what you could reasonably pay and the fees and interest just kept adding up. These are grounds to seek help sooner rather than later to fix you payment problems, improve your credit report and start down a road to a good credit history and credit score.
Improving a credit score starts with being able to make timely debt payments. Whatever the reason for falling behind in payments, a non profit debt consolidation program may be your best bet. Although it will cost a fee each month for this service, you will see a vast improvement within just a few months and before you know it you will have your outstanding debt paid off. From this point, fixing your credit history and credit score will be far easier.
Do your homework and do not take a non profit debt consolidation program at face value. Whether the debt consolidation company is non profit or for profit, there are unscrupulous people who will steer you in the wrong direction no matter where they work. If you need debt consolidation help to improve your credit, get references before you hand your money over to anyone.
What You Need to Know About Credit Counselors
Credit counseling organizations are designed for people who are so far in debt that they are facing bankruptcy. This is an important distinction. If you find yourself with poor credit and a poor credit score but are not drowning in debt, what a counselor will suggest is what you already know: be disciplined to create a workable budget and stick to it while you work out repayment plans for any creditor with which you are in arrears. Now if you have tried to do this with little success you may benefit from the service.
We all know how easy it can be to get off track and spend a bit more than we can afford to have a decently comfortable life. There are times when we don’t realize just how much credit card companies charge in interest and late fees. A nonprofit debt consolidation program or credit counseling organization will work with your creditors to reduce or eliminate late payment charges and delinquent fees.
There is another point to consider before you decide to get involved with a credit counseling or repair company. Once you are enrolled and under contract, this may show up on your credit report. With this on your report, you will most likely have trouble working out any financing or loan until you complete the contract. Credit counseling organizations can be a helpful service but make sure you understand what they can and can’t do. They will not be able to reduce the vast majority of your debt, which would require an agreement with the creditor itself. In addition, the payment arrangements they make may fall short of the contractual amount due on your credit cards and other debts. These companies, even when they agree to waive late fees, will report to the credit bureaus the late payments that will be a result of the reduced payments coming from the credit counseling organization. In these situations, your credit history and credit report will show increased delinquency levels and your credit score will most likely drop further.
The idea of a nonprofit credit counseling program should be to help the consumer become educated about how credit works and provide counseling to help them handle their finances. They also provide services to help lower the existing debt wherever possible and work with creditors to lower your monthly payments. In many cases, you will pay one monthly sum to them and they will disburse payments to your creditors. There will be a fee for this service which will be added to your payment to them each month.
If You Want to Take the Next Step
Be sure to read Need to Repair Your Credit? Understand Your Rights before you look for a credit counseling company. Most programs assess your financial situation, taking into account your monthly liabilities, expenses, and assets. They then work with your creditors to work out a payment schedule to pay down the debt. Once an agreement is in order, you will pay the credit counseling company a set amount each month and the company will in turn pay your creditors taking a piece of the payment as a fee. Just because an organization says it’s “nonprofit,” there’s no guarantee that its services are free, affordable, or even legitimate.
You can expect a start-up fee and a monthly maintenance fee, and although it may only be $10-15, this can add up fast, adding to your debt. Beware of credit counseling companies who use your first payment as the total cost of the start-up fee, which could amount to several hundred dollars.
The reason most people sign with a credit counseling company to have them work with creditors to stop those recurring fees and new late fees and penalties. These companies may not do much more than that. You still need to make the painful decisions to cut your expenses – like turning off the cable service for a period or selling a second car and taking the bus. You will still pay old late fees, interest charges, and most of the original balances on your charge accounts, as well as whatever fees the credit counseling company charges.
Reputable companies can truly help those who are in danger of foreclosure and bankruptcy. Non profit debt consolidation programs may help someone get out of debt faster or help alleviate some of the difficulty in handling credit card and debt payments as well all help educate individuals on how to handle credit and debt. Credit counseling can help those with credit issues become more educated about debt and how it affects your life, and teach you how to stay debt free. This will hopefully show you how to avoid financial problems in the future. You will receive one-on-one advice from a certified credit counselor who will work with you and your budget to design a payment plan that is unique to your situation. Credit counselors know the particulars of creditor’s rules and policies. This gives them an inside track when it comes to negotiating with your creditors.
Individuals who are jeopardy of foreclosure or need to file bankruptcy can find a state-by-state list of government-approved organizations on the website of the U.S. Trustee Program, the organization within the U.S. Department of Justice that supervises bankruptcy cases and trustees.
The term “nonprofit” does not mean free. Being nonprofit does not make them a better choice when it comes to helping you consolidate your debts. You should always do your homework and find the company and program that is right for you.
If you’re in trouble, but not on the brink of bankruptcy, consider working with your creditors directly to create a payment plan or try to consolidate debt on one single card at a low fixed rate. You’d be surprised at how many options are available to you if you take the time to look around and ask questions. The conversations are uncomfortable and debt consolidation is no fun, but remember banks and lenders want your business and will usually work with you.
Credit Repair Scams
When a person falls behind on their debt, things can be overwhelming. They may be laden down with harassing calls from debt collectors. Or worse, they might even have to go to court because a creditor, fed up with not getting their money, decided to take legal action. A person’s difficulties with debt are even more exacerbated if they are trying to buy or rent a house because of their bad credit report and credit scores. For all of these reasons many will be tempted to turn to credit repair companies. However, this may not be a wise choice.
When consumers have problems with credit, excessive debt and a bad credit profile or credit report there are a number of techniques that can be used to help the situation. Some of the solutions involve credit counseling, debt consolidation and credit repair. These are not the same processes. Credit repair companies generally engage in the sole process of removing bad credit in someone’s credit report and more often than not they either do not accomplish the job and / or charge exorbitant fees to do this. These services are generally very ineffectual and costly and are designed to take advantage of consumers in financial trouble.
The biggest issue with credit repair companies is that if they do ‘fix’ one’s credit they are using means that a person could do themselves for free. This involves sending dispute letters, something that is easy to do. A basic dispute letter will inform a creditor that they must provide documentation proving a person owes money to them. They must also correct any errors that are listed in the letter. If the creditor fails to do either of these things, it is possible that a person can get any debt associated with them erased.
This process is without question time consuming and has to be performed in a fairly precise manner to make sure the debts is identified properly, the letter is sent according to the standards established by the Fair Credit Reporting Act and that the proper follow up is completed. The amount of work involved may warrant the need for a assistance or may not, the problem with most all credit repair companies is that there fees are excessive and there results are generally underwhelming.
So, if sending dispute letters is so easy, why do people still go to credit repair companies? It’s usually because they believe the credit repair company has access to means that they don’t have access to. This is just not true. Even credit repair companies that are legal are limited to just sending out dispute letters. Consumers can do this themselves, even if they don’t know how to write one. This is because numerous sample dispute letters are available all over the Internet.
Some credit repair companies also use a scam technique known as file segregation to try to ‘fix’ the credit of their customers. The process of file segregation begins with the credit repair company asking the customer to get an employee identification number, (known as EIN). This is a form of identification that works like a Social Security number; it is often assigned to employees. Anyway, once an EIN has been obtained, the customer uses it to establish a new credit identity. Different contact information is used to make it harder for creditors to track the customer down.
The problem with trying to fix credit in this manner is that it is considered fraudulent. An individual cannot establish a new identity with the intent to escape debt associated with a previous identity. And though having an EIN is perfectly legal, things appear fraudulent because of the way different addresses are used. When the government notices what is going on, it is possible that individuals associated with the scam, (who are actually the victims), get criminally prosecuted. The credit repair companies may also get in trouble, but who cares what happens to them.
All in all, the process of credit repair is one that may take time and requires attention to detail. However, some debtors will be either lucky enough or have the right information and may actually get some of their credit expunged through the process of sending dispute letters. But the likelihood of getting all of one’s debt eliminated through an expensive credit repair company is unlikely. The one real solution is being patient, work on the debts yourself, pay back bills over time, consider debt consolidation or even bankruptcy if the bills are more than what one can handle and do your own research to solve the problem. The tools to fix your credit and debt problems are easily available to you.